Clearwater doctors got P3 loan, then dissolved their practice – but only on paper
In February, a group of doctors in Clearwater decided to cut a partner out of their radiation oncology practice by legally dissolving the partnership, then regrouping under a new name without him.
Three weeks before the partnership officially ended on May 31, however, doctors applied for and received a Paycheck Protection Program loan of $ 222,700, a federally guaranteed payment designed to help struggling small businesses. during the coronavirus pandemic. The bulk of the loan was spent on repayable expenses such as rent, utilities and payroll, including nearly $ 50,000 in bonuses for the company’s 16 employees, according to company emails.
The ousted doctor is now suing his former partners, claiming he believes he has been unfairly excluded from the practice. His name is also on the loan application. And he doesn’t want to have to pay.
“This entity was knowingly dissolved,” said Hiral Shah, former partner of Pinellas Radiation Oncology Associates, which now operates as Premier Radiation Oncology Associates. “And I don’t want my name to be associated with something like that, saying, ‘Hey, we want to take a couple hundred thousand dollars, even if we dissolve it. “”
In its rush to get relief money, the US Small Business Administration did not offer comprehensive guidelines on who could apply for small business loans. This has led to many loans which, in retrospect, seem questionable: Loans to profitable public enterprises, loans to business conglomerates, the loans that led to fraud charges. (The Times Holding Company, which includes Tampa Bay Times and associated publications, received a loan of $ 8.5 million.)
The candidates had to affirm that “the current economic uncertainty makes this loan request necessary to support … the operations in progress”.
But Pinellas Radiation Oncology Associates was bending – on paper, at least – for reasons unrelated to COVID-19. Shah said the practice grossed $ 3.5 million last year and had more than $ 1 million in assets at the time of the loan. As a critical business, it has remained open during the pandemic and has not seen a significant drop in business, he said, making the loan seem “a bit sketchy.”
“You don’t have to prove that you need the money,” Shah said. “But we didn’t need the money.
After more than a half-dozen voicemail messages and emails to Shah’s former partners and their representatives, a doctor, Michael Gauwitz, responded by email, claiming to be aware of the loan program in March. – one month after filing its notice of dissolution with the State.
“After discussion with our accountant and our health attorney, it appeared that we were eligible to apply for the PPP loan,” he wrote. “Pinellas Radiation followed all the rules to properly use the loan money.”
Gauwitz did not respond to follow-up questions. A lawyer defending him and other doctors in Shaw’s trial declined to comment.
Shah’s lawsuit seeks damages from other doctors, saying they hampered his ability to hold patients because he no longer had access to the company’s radiology equipment. In a motion to dismiss in May, the other partners alleged that Shah “had failed to commercialize his practice and generated the fewest consultations for new business, caused disruption with staff, paid more circulation than he did. was due in 2019 and disrupted plans to acquire new equipment and build a safe for new equipment. Shah disputes the claims.
The firm’s loan application was processed and signed by the firm’s accountant. Shah said he was not involved in the application process, but because he still owned more than 20 percent of the capital, his name had to be on the form. According to emails provided by Shah, the company used its loan to pay, among other things, $ 26,221.14 in payroll, $ 43,939.78 in physician payroll, and $ 49,994.25 in employee bonuses. staff.
Even though the firm spent its loan money on reimbursable expenses – including bonuses – experts are divided as to whether this was the type of business the loan program was supposed to benefit.
“If this was my client, and I was aware of it, I don’t think I would make the loan, personally,” said Bernie Dandridge, agriculture and small business development specialist at Florida Capital Bank in Jacksonville.
Having said that, “if the employees were paid, then it looks like the P3 program has succeeded in doing what it was supposed to do,” said Dandridge. “If they followed the rules, regardless of their current owner or the current status of the business, they should be able to convert it into a grant and not worry about having to pay it back.
As long as the company can show receipts proving that the funds largely went to employees, it should be clear, said Tampa bankruptcy lawyer Megan Murray.
“If they were used in the right way and delivered to what I will call the intended recipients, it seems they would still have a right to move on,” she said.
Documents filed in connection with Shah’s trial outline their plans to do so. After voting for disbandment and reform without Shah, the other partners would buy the assets of the old company, valued at $ 113,400, and reopen with largely the same staff and clientele in the same space at Countryside Cancer. Center on McMullen Booth Road. This is where the firm now operates under its new name.
Aside from the fact that he’s no longer there, Shah said, “the business has never really changed.” Patients who went there in May, when the practice got their loan, would notice little difference today. Now that he’s out of the partnership, he wants this to be clear.
“I don’t want my name associated with a loan, and my interest associated with a loan, to which I have objected, and I personally don’t think that is reasonable,” he said. “I don’t think that’s what the PPP loan program was for.
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