U.S. Senate
Sen. Bernie Sanders, right, speaks at a meeting of the Senate HELP Committee, July 25, 2024.
Steward Health founder Ralph de la Torre, who bought hundreds of millions of dollars worth of private jets, yachts, and luxury real estate while his three dozen community hospitals went for years without basic surgical supplies, functioning elevators, or air-conditioning, announced Wednesday he is refusing to comply with a congressional subpoena—because testifying, his lawyers (dubiously) claim, might cause more hospitals to close.
The Senate Committee on Health, Education, Labor and Pensions (HELP) voted 16-4 in July to serve de la Torre with its first subpoena since 1981 in the wake of news reports that the hospital chain, which de la Torre founded in 2010 with backing from the private equity firm Cerberus Capital Management, entered bankruptcy with $8 billion in debt while its CEO siphoned out more than a quarter-billion dollars and blew most of it on an epic midlife crisis, featuring a new wife 29 years his junior, a 500-acre ranch for her prizewinning racehorses, a $77,000-a-month detail for her security while traveling between the couple’s far-flung mansions, an Amalfi Coast wedding choreographed by Gwen Stefani and Blake Shelton’s wedding planner, and not one but two yachts.
Since then, news reports have revealed that Steward, despite stiffing vendors left and right, even for the lunch meat in its hospital commissaries, had spent millions of dollars paying private spies to illegally surveil, harass, and even fabricate bogus criminal schemes supposedly perpetrated by various critics of the company, including a former executive, a British hedge fund manager, and a Maltese health minister.
Somehow, none of this conduct has come up during Steward’s bankruptcy proceedings, which began in the notorious complex case panel of the federal bankruptcy court in Houston in May. The “debtor friendly” bankruptcy court has built a brand that revolves around exploiting the awesome powers of the bankruptcy code to get people like de la Torre off the hook for their misdeeds with the utmost discretion and alacrity. This week, Judge Christopher Lopez approved the sale of six of Steward’s eight Massachusetts hospitals above creditor objections; earlier, he allowed the closure of two others, which shut their doors over the weekend.
In his letter to the HELP Committee, Steward’s attorney claimed that testifying before the Senate would violate a “federal court order” preventing Steward from sharing information discussed in bankruptcy mediation talks, and cast de la Torre’s refusal to show as his way of pursuing the “shared goals” of “supporting continuity of patient care, saving jobs [and] providing an avenue for recovery for general unsecured creditors.” In essence, de la Torre was saying that if he testified, the hospitals would not be able to secure a buyer and have to close, devastating their communities.
The Justice Department investigation into Steward’s potential Foreign Corrupt Practices Act violations has since widened to include following the money at the now-insolvent hospitals.
Senators were not buying it. In a joint statement, Massachusetts Sens. Elizabeth Warren and Ed Markey called for the committee to hold de la Torre in contempt of Congress, the crime for which former Trump strategist Steve Bannon is currently serving a four-month federal prison sentence. HELP Committee chairman Bernie Sanders (I-VT), who shared photos of all three of de la Torre’s private jets before the subpoena vote, said the committee would “move forward aggressively to compel” the former cardiac surgeon to testify, while ranking member Bill Cassidy (R-LA), himself a physician, issued a milder statement calling de la Torre’s defiance “consistent with a disregard for norms” and promised to “address” the matter.
“It is time for Dr. de la Torre to get off of his $40 million yacht and explain to the American people how much he has gained financially while bankrupting the hospitals he manages,” Sen. Sanders said in a statement.
STEWARD SQUEEZED YACHTS AND JETS and destination weddings out of struggling hospitals with the help of a real estate investment trust called Medical Properties Trust using a common private equity business model called the “sale-leaseback.” Back in the zero-interest-rate era, MPT bought Steward’s real estate at colossally inflated values—think $262.9 million for a failing hospital with an assessed value of $60 million—and then generously kicked back cash to Steward to help with the first few rent payments. It worked for both sides; Steward because de la Torre needed all the cash he could get to finance his lifestyle, MPT because its executive compensation was linked to deal volume and its investors did not bat an eyelash so long as the REIT kept paying its dividends.
But just as Steward unraveled under the twin ravages of corporate looting and $400 million annual rent payments, MPT is now running out of cash as well. Earlier in the summer, it lost control of the bankruptcy process and was forced to let other lenders fund the debtor-in-possession financing. Within a few weeks, Steward had sued MPT and scheduled depositions of numerous MPT executives including CEO Ed Aldag, arguing in its complaint that MPT was undermining its attempt to sell off its hospitals by “exerting undue influence on Potential Bidders in a desperate attempt to save its above-market, burdensome, and inflated leases”—which it suggested were not even genuine leases but “disguised financings.”
The conflict would not last long. Judge Lopez, whose former firm Weil, Gotshal is representing Steward in the bankruptcy, assigned his fellow judge and mentor Marvin Isgur to mediate the dispute. And MPT added a new lawyer to its team: Isgur’s former clerk Kiran Vakamudi of Vinson & Elkins. By the time Labor Day weekend arrived, the two sides had ironed out an agreement in principle, in which MPT would agree to continue financing the operations of the three dozen hospitals that hadn’t closed or found buyers, and cede to Steward $385 million of the proceeds of a Florida hospital sale. It was a crazy deal for Steward, not least because the hospitals MPT had agreed to fund were burning tens of millions of dollars a month that the REIT does not have.
MPT does get something potentially quite valuable from the deal, which is an end to the conflict and a restoration of the official secrecy that has long shrouded its business model.
But that discretion comes on the heels of a decade during which de la Torre’s conspicuous consumption amid the climate of extreme—and unsafe—austerity that governed his hospitals was one of the worst-kept secrets in health care. In May 2023, the Prospect published a story detailing the Jeff Bezos–style mega-yacht de la Torre purchased with his portion of a $111 million monster dividend Steward issued to its shareholders in 2021. Earlier this year, a Maltese judge recommended criminal charges against de la Torre and another Steward executive; at least half a dozen whistleblowers have formally accused the company of promoting illegal kickbacks and other chicanery in lawsuits over the years.
While authorities in this country have been glacially slow to stop the plunder of Steward’s hospitals, the doggedness of Malta’s probe appears to have finally shamed the Department of Justice into opening its own criminal investigation into Steward’s potential Foreign Corrupt Practices Act violations this summer, which seems to have since widened to include following the money at the now-insolvent hospitals. And now, of course, the Senate’s interest has been piqued. It seems increasingly, mercifully unlikely that de la Torre will get away with it entirely—though as a former colleague of his told me recently, “Ralph’s got a lot of passports, he’s been planning this for a while.”
