Spiegel Says Walker County Could Make Payments On $8,705,000 Hutcheson Debt; James Says Letter is Heavy-Handed

Thursday, June 30, 2016

Erlanger Health System CEO Kevin Spiegel has written Walker County Commissioner Bebe Heiskell to say that Erlanger would consider taking payments on the $8,705,000 Hutcheson debt.

Stuart James, special counsel for Walker County, called the overture "heavy-handed."

Walker County earlier offered a $1.3 million "global settlement" that was rejected by Erlanger. Catoosa County has agreed to pay the amount it guaranteed while Erlanger was managing Hutcheson Medical Center that later went bankrupt.

Mr. Spiegel wrote to Commissioner Heiskell:

"I hope this letter finds you well.

"In light of the litigation currently pending between Walker County and the Erlanger Health System, I have intentionally tried to stay above the fray in order to allow the process to run its course. That said, however, I have remained apprised of the litigation and the incidentals associated with it. Specifically, I am aware that Walker County, through its "special counsel", has issued a number of press releases relating to Walker County's recent offer in the amount of $1.3 million. As I'm sure you can appreciate, I found such offer as offensive and unworthy of response (and certainly unworthy of a counteroffer). That remains my (and Erlanger's) position.

"That said, if Walker County is truly interested in engaging in a serious dialogue to resolve its obligations to Erlanger, I am more than happy to do so. Please understand though that such resolution can, in no instance, include any offset of the total amount currently due to Erlanger, which by our calculations, is $8,705,000.

"Notwithstanding our firmness on the specific dollar amount, there may be options with regards to Walker County making payments over time (at a reasonable rate of interest of course). Erlanger is further open to other creative ideas your team may have for the repayment of this debt.

"Commissioner, I do understand that you, unlike your counterparts in Catoosa County, have started down a path of denying and defending any liability on Walker County's commitments here and that's certainly your prerogative. In the meantime though, it would appear to me that you and your team are simply wasting the money of your constituents (by continually taking unsupportable and sanctionable positions that have heretofore been soundly rejected at every turn by the Court) with regards to obligations that you and your team were personally involved in and committed to.

"Whether or not you recall, you and your team were heavily involved in the negotiation of the management agreement and the corresponding line of credit documents. You and your team agreed to the terms therein. You and your team committed to guarantee the payments by Erlanger to Hutcheson Medical Center.

"While I guess one can envision some short-term benefit to Walker County's refusal to do what it committed to, I'm sure you can appreciate how such appears to current and prospective creditors of Walker County. It is thus my hope that you rethink your position as to Walker County's debt to Erlanger.

"If you are interested in honoring Walker County obligations, let me know."

Attorney James said, "In a letter dated June 23 but overnighted and delivered today to Walker County Sole Commissioner Bebe Heiskell, Erlanger CEO Kevin Spiegel offers to negotiate payment plans with Walker County as long as the County agrees to pay Erlanger $8,705,000.

"Spiegel makes a veiled threat saying, “While I guess one can envision some short-tern benefit to Walker County’s refusal to do what it committed to, I’m sure you can appreciate how such appears to current and prospective creditors of Walker County.'

”He closes the letter by saying, 'If you are interested in honoring Walker County obligations, let me know.' The tone, content and timing of the letter is disturbing at best. With the Hospital Authority scheduled to meet in a few short hours, and by bypassing the Authority and Special Counsel, the letter has done nothing more than make a bad situation worse.

“This letter and the timing of the message is another example of Erlanger’s heavy-handed tactics against Walker County. We remain hopeful that a resolution that follows the law will be reached in coming days. I am surprised that the letter is deemed confidential settlement communications but is sent by Mr. Spiegel bypassing counsel for all parties in this case. The letter, ethically speaking, should have been sent by counsel to counsel or there should have been a request to have direct communications.

"I cannot treat this as a settlement overture and find it curious that Mr. Spiegel took actions to bypass all attorneys representing their clients in an apparent attempt to intimidate Commissioner Heiskell. We have made two attempts at settlement and this is the response we get. I will respond to the letter to Karen Bragman, counsel for Erlanger, in an appropriate way.”


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