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Medical Associates, management company lock horns over share transfer

Published:Sunday | October 25, 2015 | 12:00 AMMcPherse Thompson
Medical Associates Hospital as seen in April 2013.

The police have been asked to investigate the circumstances under which more than 400,000 shares valued at about $65 million were transferred to Medical Associates Hospital from Community Medical Services Limited, the management company for the institution and its largest shareholder.

A complaint was filed in September this year by chair of the board of Community Medical Services, Dr Beulah Grace Haynes, against Medical Associates and its directors, claiming a fraudulent transfer of the shares in September 2014.

Attorney Raymond Clough, who is representing Community Medical, told Sunday Business that the matter has been reported to the police and they are investigating. Attorney Matthieu Beckford of Rattray Patterson Rattray, who is among those representing Medical Associates, declined to comment on the matter at this time.

According to documents related to the complaint seen by Sunday Business, Haynes identifies herself as a long-standing shareholder in both Community Medical and Medical Associates and has been associated with the management of both companies since 1975.

She was appointed company secretary of both the hospital and the management company in 2000. She subsequently retired from the position at Medical Associates while retaining her post at Community Medical. Thereafter, she was appointed chair of the company's board.

Dr Haynes said she has been involved invariably in all transactions related to Community Medical since 2008 and, by resolution of the board, the late David Levy and herself were the only authorised signatories of the company with respect to a share transfer.

According to background information in the complaint, in the 1970s Medical Associates went into bankruptcy and in order to save it directors and shareholders invited the management company Community Medical to manage and operate the hospital.

Community Medical held 404,164 shares in Medical Associates, the single largest block and therefore had controlling interest in the health facility as at October 2013.

Doctors who invested in Medical Associates, were also involved in the management of each department, brought it back to financial stability and appointed a board to manage the day to day operations of the hospital.

In about 2002, the hospital again experienced financial difficulties due to financial irregularities, and at the request of shareholders, Simone Khouri was appointed Chief Executive Officer. She returned Medical Associates to solvency and brought in Michael Lee-Chin's AIC Barbados Limited as an investor.

AIC agreed to lend $65 million to Medical Associates, subject to the hospital offering it a significant amount of shares.

Khouri resigned in 2008 and was reappointed chief executive officer in 2012 and managing director in 2013. During her most recent appointment she started negotiations with AIC to act on its promise to invest in the hospital.

However, the shares were not transferred largely because AIC was no longer interested in the agreement, and the stamp duty and transfer tax, which together was assessed at $2.22 million, was deemed to be too high.

Haynes said the original transfer instrument which she signed, but was returned by the stamp commissioner's office, was at all relevant times in the custody of Community Medical's attorneys DunnCox and that she had not signed any other instrument of transfer.

Community Medical Services opted to pursue another course by changing the board of Medical Associates to restore what Haynes said was the integrity of the hospital. As such, in July 2014, notice was given of an extraordinary general meeting.

Directors of the management company issued proxies in respect of their shares to ensure that at the meeting, scheduled for September 22, 2014, they would be able to pass a resolution requesting the retirement of the board of Medical Associates and the appointment of a new board and company secretary.

However, at the meeting, agents of shareholders were advised that Community Medical's shares had been transferred and hence they were not entitled to vote.

Community Medical subsequently sought to ascertain the status of the transfer and on September 24, 2014 was advised by their then attorneys DunnCox that the relevant shares had not in fact been transferred.

The chartered secretary for Community Medical also investigated the matter and in February this year reported to Haynes that the shares had not been transferred.

However, in April, Medical Associates' attorneys at Rattray Patterson Rattray advised Community Medical that the share transfer was undertaken on September 22, 2014, the date scheduled for the extraordinary general meeting of Medical Associates, using an instrument dated 2008.

That was despite the original document being in the custody of the law firm DunnCox at all material times, Community Medical is contending.

The management company subsequently sought to cancel the transfer of shares, suggesting the process was never completed. However, lawyers for Medical Associates advised the company that the transfer was completed before the date of the letter purporting to cancel the transfer was created.

An inspection of receipts obtained by Haynes from Rattray Patterson and Rattray shows that the transfer tax and stamp duty assessed at just over $281,000 and $338,000, respectively, were considerably less than the assessed value in 2008, and no penalty was applied, despite the time lapse between 2008 and 2014.

Haynes said she was confounded as to how the transfer of shares could have occurred, given that she is one of two persons authorised to sign any such instrument of transfer and that both must sign for it to take effect.

Community Medical Services is seeking to determine, among other things, why a transfer of shares that was assessed at more than $2 million in 2008 was stamped for just over $620,000 in 2014.

The head of the Fraud Squad, Superintendent Anthony McLaughlin, declined to confirm or deny that they were investigating.