Winona's trustee seeking money, answers:

September 19, 2005

Winona Memorial Hospital hasn't treated a patient in more than a year, but it continues to care for the leftover medical records of roughly 60,000 people.

The fate of those records is one of many loose ends waiting to be tied up by lawyers and others shepherding the defunct hospital through liquidation.

Indianapolis attorney Paul Gresk, the hospital's Chapter 7 bankruptcy trustee, also wants to find cash to give hospital employees their last paycheck. And he wants to learn more about millions of dollars transferred from the hospital to its former owner, Texas-based Leland Medical Centers Inc.

Employees have said they never received pay for their last two weeks of work. The hospital also diverted more than $50,000 slated for employee 401(k) accounts to help keep the doors open.

Gresk said he's exploring ways to find money for the paychecks. Most of the $1.1 million raised last spring from an auction of hospital equipment went to other creditors. However, the trustee was able to keep more than $71,000, some of which will go toward paychecks.

The trustee identified payments on unpaid accounts as another possible source. He's also examining payments the hospital made before the bankruptcy filing to see whether certain creditors received preferential treatment. If so, some of those payments could be recovered.

This spring, Gresk filed a complaint in bankruptcy court asking for more information about $3.6 million the hospital sent Leland between 2002 and last year. The complaint also states former hospital CEO Patrick E. Feyen received $865,002.

A pretrial report for that case adds that the hospital gave an unspecified amount of money to a John Dille "for no apparent reason." Dille's connection to the hospital isn't shown in court records, and he could not be located for comment.

The trustee wants to clarify whether the hospital was insolvent when money was transferred, whether those transfers left the hospital insolvent, and what value Winona received in return.

Feyen's payments were part of his contract to run the hospital, said Chris Baker, an Indianapolis attorney representing him and Leland. Baker said he had no idea who Dille is.

The transfers made to Leland were done "as any owner of a business can do," Baker added, noting that the money was used in part to try to fix the hospital's problems.

"They were trying to develop, refinance and restructure the business," he said.
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