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CARD Clinic files for Chapter 11 bankruptcy

The Western News | August 9, 2023 1:30 PM

The debts are piling up for the CARD Clinic in Libby, leading it to file for bankruptcy in federal court Monday.

The Chapter 11 filing will allow the Center for Asbestos Related Disease to continue to operate and serve its patients, according to board Chair LeRoy Thom.

“To the best of my understanding, it protects CARD funds so we can continue to operate and take care of our patients and prevent the railroad from cleaning us out,” Thom said in a phone conversation Wednesday with The Western News.

When asked if the board was considering any action, such as termination, against any CARD employees, Thom said, “We don’t micromanage. I think everything will continue as it has. The court will rule on our plan and the railroad may dispute it, but our attorney sounds hopeful.”

CARD Executive Director Tracy McNew said she has no plans to resign.

"I remain dedicated to CARD and hopeful that justice and truth will prevail," McNew said in a written statement to The Western News. "CARD is a 501c3 nonprofit public service organization governed by a volunteer Board of Directors. CARD stands by its practices and mission to serve the Libby community and others impacted by asbestos exposure."

The board made the decision on July 28 to authorize McNew to retain the Billings firm of Patten, Peterman, Bekkedahl and Green to represent it in the bankruptcy. According to information on its website, it has been named ‘Best Lawyers, Best Law Firms’ in the area of bankruptcy and creditor rights/insolvency and reorganization law by the U.S. News and World Report from 2019-2023.

McNew further explained the decision to declare bankruptcy.

"We did so as a necessary shield to safeguard assets pending the outcome of an appeal," she said. "CARD’s notice of appeal was filed on July 20, but it could take over a year to be ruled on by the Ninth Circuit Court.  Bankruptcy will allow CARD to continue offering its services and paying its employees during the appeal process.

"My understanding is that depending on the appeal's outcome, CARD could come out of bankruptcy because the judgment is lifted, or CARD could be restructured with a plan to resolve our debts over time while continuing to offer our services," McNew said. "The judgment against us is approximately $6 million and even having to immediately pay 25% of that, which is BNSF’s portion, would put us out of business. There was an automatic 30-day stay on their ability to collect, but that time has nearly expired."

Also, CARD attorneys will represent the clinic in a hearing later this month to determine if an ombudsman is required to monitor the quality of patient care and to represent the interests of patients of the health care business.

The hearing is set for 9 a.m. Wednesday, Aug. 30 in the bankruptcy courtroom in the Russell Smith Courthouse in Missoula in front of U.S. District Judge Benjamin P. Hursh.

Also, a meeting of creditors, in which a CARD representative must be present, is set for 10 a.m. Sept. 14

CARD has been battered over the last month or so after a federal jury ruled it submitted 337 false patient claims making people eligible for Medicare and other benefits they shouldn’t have received. The jury said 246 violations occurred before Nov. 2, 2015 and 91 after that date. BNSF Railway, upon behalf of the United States government, brought the suit in 2019 under the False Claims Act. The act allows private parties to sue on behalf of the federal government.

BNSF — which is itself a defendant in hundreds of asbestos-related lawsuits — argued the center submitted claims on behalf of patients without sufficient confirmation they had asbestos-related disease.

Then, in July, U.S. District Judge Dana Christensen ruled CARD must pay nearly $6 million in damages and penalties. Christensen ordered that the clinic must award the government $3.2 million in damages and imposed $2.5 million in penalties. BNSF is eligible for 25% of the total proceeds.

Following that, the firm representing BNSF in the suit against CARD, Knight Nicastro MacKay of Missoula, filed a motion against the clinic for nearly $1.8 million in legal fees and costs it says it is owed. According to the False Claims Act, a court must award attorney fees to any prevailing or substantially prevailing party when appropriate.

CARD filed an appeal on July 20 that it is contesting the jury’s verdict and all adverse rulings in the matter to the Ninth Circuit Court of Appeals.

McNew said that, "CARD’s only reason for filing is the judgment that came about following a 2019 BNSF Railway False Claims Act lawsuit against us. CARD does not otherwise have any long term debt and our bills are paid in a timely manner each month. We also have a federal financial audit conducted by outside accountants annually to ensure compliance with our grant requirements and relevant laws. CARD will continue to operate and pay bills as usual for services received after the bankruptcy was filed."

Thom and McNew have previously said the clinic’s defense was hampered by a ruling that barred testimony from former U.S. Sen. Max Baucus of Montana. Baucus helped craft a provision in the Affordable Care Act that made Libby asbestos victims eligible for government benefits. He’s said the clinic was acting in line with that law.

"CARD is disappointed in the judgment, especially since the judge issued an order blocking CARD from finding out the bases of the 337 false claims," McNew said. "Based on the number, CARD can guess what the jury determined were false claims, but CARD does not even have definitive answers about what the jury found to be false claims. Based on what CARD thinks the likely bases of the false claims were, it has changed the process of filling out EHH forms to qualify people for Medicare. CARD has also appealed the verdict and the trial court’s rulings. It comes down to interpretation of the Affordable Care Act’s Libby provision. The judge and subsequently the jury interpreted the ACA differently than CARD has. Since 2010, CARD’s implementation of the ACA provisions has remained constant. Prior to this lawsuit, CARD’s implementation of the ACA provisions had never been at issue. CARD’s granting agency, ATSDR, testified at trial that it agreed with CARD’s implementation of the law.”

McNew also said in a previous interview with The Western News that the clinic has received funding for the new grant year which will run from September 2023 through August 2024.

In terms of those currently receiving benefits, "It is CARD’s understanding that the government has no intention of taking away anyone’s existing benefits," McNew said before.

According to prior reporting by the Associated Press, the Libby area was declared a Superfund site two decades ago following media reports that mine workers and their families were getting sick and dying due to hazardous asbestos dust.

Health officials have said at least 400 people have been killed and thousands sickened from asbestos exposure in the Libby area.

The clinic has certified more than 3,400 people with asbestos-related diseases and received more than $20 million in federal funding, according to court documents.

Asbestos-related diseases can range from a thickening of a person's lung cavity that can hamper breathing to deadly cancer.