The troubled Sacred Heart Hospital in Chicago paid at least $5.5 million to companies controlled by its former owner and CEO, Edward Novak, who was arrested by the FBI in April, according to a Crain's Chicago Business report.
The payments were disclosed in for-profit Sacred Heart's bankruptcy filings, which do not state a reason for the transfers to Mr. Novak's companies but categorize them "as not in the ordinary course of the business," according to the report.
Transfers were made to three companies headed by Mr. Novak: Bentley Management Group LLC, West Side Management Corp. and family medicine clinic Chen Medical Center.
A lawyer cited in the report who is not representing Sacred Heart but specializes in bankruptcy said the transfers may have been legitimate, but do raise questions. If the payments are identified as fraudulent conveyances, or transfers meant to avoid paying creditors, they could be clawed back.
Sacred Heart closed July 1 and filed for protection from creditors July 2.
In April, federal authorities arrested Mr. Novak, CFO Roy Payawal and four physicians. The alleged scheme involved physicians receiving more than $225,000 in cash and other forms of payment for referring Medicare and Medicaid patients to the 119-bed hospital.
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