Petersen Health Care's creditors are asking a federal bankruptcy judge for permission to delve deeper into how money was shuffled among the nursing home company, the CEO, and his other businesses.
Peoria-based Petersen Health Care filed for Chapter 11 bankruptcy in March, and the plan is to auction off the company's assets to pay back lenders. The company owes about $295 million to its various creditors.
Petersen Health Care's unsecured lenders loaned money without demanding collateral, and they're now asking the court to allow them to request a trove of additional records to search for more avenues for clawing back what they're owed.
Petersen Health Care is one of the nation's largest nursing home operators, with more than 90 properties in Illinois, Iowa, and Missouri. The nursing homes are organized under a vast web of limited liability corporations that are all ultimately controlled by CEO and owner Mark B. Petersen.
Petersen also operates a chain of hotels, and the Louisville Slugger Sports Complex in Peoria. Among other things, the unsecured creditors allege $45 million has been loaned or transferred from one or more of the health care companies to aid Petersen's personal efforts to branch out into new industries.
"For the unsecured creditors, it is critical to understand whether these transactions, dealings and disbursements may support potential claims and causes of action, and whether they are viable sources of recovery, as these cases move quickly towards a sale closing and plan process thereafter," reads a June 14 court filing.
In a response filed June 20, Petersen Health Care's legal team calls the requests "defective in meaningful and substantive manners." They acknowledged the creditors have the right to make the requests, but said they also have the right to object to any of those asks.
There's also other bullet points the creditors want to tackle. In the year leading up to the bankruptcy filing, the creditors say Petersen received at least $5.4 million in transfers from his health care companies. At least $2.1 million in disbursements were reportedly made to other companies under his control that are not listed in the bankruptcy filing.
A negative $22.3 million note payable is listed as an outstanding liability to Petersen, and an uncollected $15.9 million receivable is listed as "due from MBP" as of the end of last year, according to court filings. A negative $3.9 million dividend is reportedly also listed as an outstanding liability.
Creditors also are questioning the acquisition of a private plane; and of various other vehicles owned or operated by the companies. They characterize some of the Petersen team's other statements as "cryptic."
Petersen declined a salary for his CEO role for at least the last decade, but "occasionally" paid for personal expenses out of the accounts of his companies, according to May 31 court filing by Petersen's company. The debtors say those payments were "accurately recorded as dividends."
Petersen also acted as a funnel to transfer money between his health care companies, or from a health care company to another entity within his larger business enterprise "as a method of intercompany cash management," according to statements attributed to Petersen's camp. They say records of corresponding deposits back into the enterprise aren't currently available due to a data breach, but they're working with a third-party accounting firm to review and locate those records.
The filing notes payments were sometimes made to Petersen, who then used the money to pay off credit cards used for business expenses. Until 2021, some of Petersen's companies didn't file tax returns and were instead accounted for within Petersen's personal tax returns, according to the company's court filings.
A hearing on the discovery motion is set for June 27. Bids for Petersen Health Care's assets are currently due by noon on June 28, with a potential auction date set for July 1.
