Unsealed records point to blurry lines inside Reditus as COVID profits soared
Newly unsealed documents in the Reditus lawsuits point to a federal investigation that’s still very much active – and that former CEO Aaron Rossi’s business partners accuse him of stealing or squandering over $100 million in company money as profits soared during the pandemic.
Federal agents served search warrants less than three weeks ago (Feb. 16-17) at Reditus’ facility in Pekin and a neighboring facility also tied to Rossi, according to a report provided to a Tazewell County judge by the court-appointed receiver who’s overseeing Reditus. “The warrant indicates that the government is investigating various healthcare and other fraud offenses,” the receiver wrote.
It's unclear what exactly they’re investigating. WGLT and WCBU have previously reported that the U.S. Department of Justice was investigating Reditus’ billing and contracting practices. That’s beyond the scope of the pending federal tax and mail fraud charges that Rossi already faces, for which the allegations pre-date Reditus and the pandemic. Rossi has pleaded not guilty.
The active federal probe is among the many new pieces of information disclosed in over 400 pages of Tazewell County court documents obtained Monday by WGLT and WCBU. Those documents and others were unsealed by Judge Stephen Kouri as part of civil litigation involving Reditus.
Included in those documents is an amended version of a lawsuit filed by James Davie, a former business partner who accuses Rossi of squeezing him out of Reditus operations and lavishly spending on himself and family with Reditus’ funds.
Rossi’s team has called many of those claims “baseless” and accused the former business partners of trying to “litigate via public opinion.” Rossi’s team has tried to keep some documents from becoming public, citing a protective order in place in the criminal case against Rossi.
“Press coverage of this case has been significant in the local area and the revelation of unproven details of criminal investigation will inevitably gain public attention, creating an air of impropriety around (Rossi and Reditus), thereby tainting the jury pool with respect to this purely civil matter,” Rossi’s attorneys wrote in a Feb. 15 filing.
“The gist” of Davie’s allegations, his lawyers wrote in their Dec. 29 amended complaint, is that Rossi and his lawyers “looted Reditus Labs of over $100 million through inflated compensation, conflicted transactions, mismanagement and excessive spending.”
Davie’s lawyers say Rossi improperly hired himself to run Reditus, and then secretly wrote himself CEO and management contracts – even backdating them – that included huge compensation. Rossi’s initial contract in 2020 called for a base salary of $30,000 per month, plus 60% of Reditus profits, according to Davie and a report from the receiver. A later management contract that began in 2021 changed that to $83,333 per month and 30% of Reditus’ net income, court records show.
Reditus was making big money during this time.
The Pekin-based company started in 2019 as a small lab with PCR testing capability – meaning it was “fortuitously poised to reap massive profits from the substantial and acute need” for PCR testing when COVID hit in spring 2020, Davie’s lawyers said.
Reditus “went overnight” from about $1.8 million in annual revenue (before the pandemic) to $137 million in revenue in 2020, to nearly $275 million in 2021, according to Davie’s lawsuit. Of that $137 million in revenue in 2020, Davie claims “at least $64 million” was profit.
Reditus had 148 contracts for COVID-19 testing and quickly grew to around 300 employees. But most of the money was concentrated in its State of Illinois COVID testing contracts. Those contracts with the Illinois Department of Public Health and the Illinois Department of Corrections made up about 81% of its revenue in 2021 and 59% in 2022, according to the receiver.
“The pandemic provided the perfect storm for Rossi to pillage and rob Reditus Labs and (Davie) with help from his co-conspirators,” Davie’s lawyers wrote.
Those state contracts dried up quickly last spring; IDPH and IDOC both moved to terminate their contracts with Reditus after Rossi was first criminally charged in March 2022.
“The loss of these contracts significantly changed the prospects for Reditus and limited its go-forward strategic options,” a member of the receiving team wrote Jan. 31, 2023.
The newly unsealed documents suggest blurry lines between Reditus, Rossi, and an array of other business interests tied to Rossi. Davie said Rossi was using Reditus as a “personal piggy bank.”
As the money flowed to Reditus, Rossi allegedly used it to fund his own lavish lifestyle – or “grossly unreasonable and unnecessary company perks,” as Davie puts it. Rossi allegedly bought over $950,000 in “bespoke” (custom) clothing, numerous luxury “company cars,” over $280,000 in jewelry and watches, and hired personal bodyguards and two pilots who flew him on many personal trips funded by Reditus, Davie’s lawsuit claimed. (The receiver found three private planes owned or financed by Reditus.) Rossi allegedly used one of his other companies to spend Reditus money on condos and land, including a 730-acre farm/hunting property that cost $3.5 million.
In his first report to the judge last spring, the receiver noted that Reditus’ money had been used to fund separate Rossi companies like PAL Health (an orthotics firm) and AJR Brands (a marketing and design firm). Reditus leased its facilities from separate, affiliated companies owned by Rossi.
It’s receiver Adam Silverman’s job to untangle all of this. He was appointed April 14, 2022. That work hasn’t been easy.
“The transition from the company’s prior senior management to the receiver’s management team has been far from seamless,” Silverman wrote in his June 2022 update to the judge.
On the day the receiver was appointed, Rossi sent an email to staff that led to “confusion among the company’s employees” about who was in control of day-to-day operations at Reditus, the receiver said. The receiver’s security consultant moved to restrict access to the company’s facility after they stopped two people from trying to remove property purportedly belonging to Rossi from his chief of staff’s office, the receiver said.
Rossi ultimately took a leave of absence June 14, 2022. The receiver’s work has continued, including overseeing the shutdown of operations in November and the selloff of assets.
Davie said Rossi’s conduct shortened the company’s life.
“It was and could have remained extraordinarily profitable,” Davie’s lawyers wrote.