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The Rise and Fall of Phoenix: A Fleecing of Carmi

With the stroke of a pen, Phoenix will be relieved of hundreds of thousands of debt by the City of Carmi and with it hundreds of thousands of dollars of donations, pledges and contributions from community members are gone.  The promise of a hospital by the Phoenix Foundation, it’s Board and past Executive Director and Administrator will have been devoured by it’s own delinquency.  It comes as Phoenix formally sells it’s rehabilitation and nursing facility to purchasers from New York.

Following a closed session at Tuesday night’s City Council meeting, the board reconvened and voted to relieve Phoenix of the entirety of its debts, liens and any burdens.  That relief amounts to somewhere in the neighborhood of $400,000 owed to the city.  It also for all intents and purposes means the $300,000 in donations, pledges and in kind donations is gone, lost, and for naught.  WROY/WRUL had to ask for the minutes following the closed session as they weren’t immediately made available to the media.  The motion reads as given the sale of Phoenix, the City of Carmi will retain the soccer fields, but will release its mortgage to the portion of the hospital property including the nursing facility and parking lot as well as the tract of land north of Phoenix and running all the way to Webb Street and giving the right of way to the new owners of Phoenix Nursing and Rehab.  The debt relief is contingent upon the actual sale of Phoenix.  Council was clear to include that a major consideration in their decision is the effect it will have on employees and current residents saying if it wasn’t an ongoing concern of residents and employees the deal would probably never have happened.

A source tells us the sale of Phoenix for $200,000 is expected to be finalized today (Monday).

The word for word release of minutes following Tuesday’s meeting follows:

Council went back into open session at 6:45 p.m.

Motion: The City of Carmi for consideration to be specified hereafter will release its mortgage to a certain area of the hospital property generally defined as; half of the parking lot by the old emergency room, the east wing and breeze way of the currently existing nursing home, a tract of land that is north of the east wing of the nursing home and goes all the way to  Webb Street and will give a right of way to its mortgage to the new owners of the nursing home that is along the south end of the hospital property for ingress and egress to some buildings that exist on the nursing home properties east side. The consideration will be; that Phoenix Nursing & Rehab and or Phoenix Foundation will caused to be transferred free and clear of any liens or any encumbrances to the City of Carmi the property which is across the street, which is commonly referred to as the “soccer fields” that all legal work to accomplish the release of the mortgage and the transfer of the property will be done by Phoenix and on the condition that the proposed sale by Phoenix to the purchasers from New York is closed on Friday, November 6th, 2015 and specifically if that sale does not occur then this deal is null and void. A major consideration in what the City Council is doing is the effect this will have on the employees of Phoenix Nursing & Rehab and upon the current residents of that facility and upon residents that are to come to that facility. Because if it wasn’t an ongoing concern with residents and employees the deal would have probably never happened!

Motion made by Alderman Doug Hays and seconded by Alderman Steve Winkleman

Following is a timeline of events that led to that rise and fall of Phoenix.

It was December of 2005 when Cornerstone Healthcare, operating as White County Medical Center abruptly closed its doors just 7 ½ months after ending it’s nursing care center.  Soon after, the Phoenix Foundation was formed as a 501(c)(3) non profit organization with the intent of renovating and re-opening a 10 bed hospital with emergency, ancillary, rehab and long term care services.  By 2007, more than $300,000 worth of donations, pledges and in kind donations had been secured from the community.

The Illinois Health Facilities and Review Board stated the group estimated a cost of just $515,000 to modernize the facility along with an additional 1,440,500 needed within the project cost.  The community believed it was possible even if it might be an uphill climb.

In March of 2008, the City of Carmi applied for and received a grant for money to come into the revolving loan fund.  That amount ended up being $730,000.  The City and Phoenix then entered into a loan agreement with Phoenix receiving the money in two separate distributions.  The first one was in the amount of $433,750 and the second at $293,750.  The money was used in partial to open Phoenix Rehabilitation and Nursing in April.

 In 2009, a $3,000,000 grant was awarded by then Governor Pat Quinn and the head of state even made a trip to Carmi to deliver the good news on a beautiful late August afternoon.  The delivery of some of those funds was delayed due to the poor state of financial affairs in Illinois and Phoenix had to wait until Illinois could sell the necessary bonds.  Still yet, it wasn’t long before Administrator Lil Fortner received the first payment of $750,000.  But even prior, July of 2010 was the last payment Phoenix would make to the City of Carmi to their revolving loan debt for what would turn out to be many, many months.

In November of 2010, the community was teased with potential progress as Phoenix Executive Director Angie Helsel spoke with the Carmi Kiwanis Club saying she expected the hospital building would be getting a new roof anticipating work to begin within 2 weeks.  It was around this time the public had begun to grow restless hoping for updates and wondering if the idea of the hospital coming back was no longer a possibility.  Regular questions into progress were constantly met with redirections and blame of the Illinois Department of Public Health and what was referred to as “the hoops they make us jump through”.  Still yet, Helsel urged the community to remain optimistic saying that the 3 million dollar grant should finance the modifications necessary to re-open the facility.  Media was even welcomed for tours of supposed progress and the planned layout.

Nearly two years later, in August of 2012, the Illinois Department of Employment Security filed a $52,000 lien against Phoenix Rehabilitation and Nursing.  Documents showed that the organization had failed to make unemployment contributions back to 2009.  Phoenix owed more than $43,000 in 2009 4th quarter unpaid contributions plus all of 2010 and the first two quarters of 2011.  It was then that Administrator Lil Fortner first stepped up to the plate and accepted the blame telling us here at WROY/WRUL News that it was all her fault.  She made excuses saying it was the state’s fault for not making timely Medicaid payments.

No more major news came out of Phoenix until May of 2014 when the implosion finally began.  City Attorney Greg Stewart had finally had enough telling the Carmi City Council that he had sent a letter to Phoenix in the fall of 2010 stating the organization was behind on their revolving loan payments.  The letter was met with no response.  Then, in December of 2010, Stewart said he sent another letter declaring the loan in default triggering a default interest rate of 12%.

Following the December letter, Fortner would make contact with the city (not Stewart) to make a few loan payments and also toward delinquent utility bills.  Stewart would send another letter in May of 2011 to notify Fortner of the loan being in default while also noting it was in the amount of about $300,000 or 22 months on the loan repayments.

By June of 2013, City Attorney Greg Stewart was demanding records and the general ledger so that he himself could investigate just where payments were being allocated.  What he received instead were a few income tax returns and some balance sheets.  While preparing for the meeting in May of 2014, Stewart also found out Phoenix was behind on utility bills for light, water and sewer…behind to the tune of $63,000 with the last payment coming in the fall of 2013.  Stewart also would tell the council that he’d learned of federal tax liens that were being filed against both Phoenix and Lil Fortner herself for not doing what she was supposed to with the money that came out of employee checks for federal withholding or the employer 941 forms for Phoenix’s portion.  They amounted to more than $195,000.  Beyond that, an additional two liens, one against Phoenix for $28,500 and another against Fortner individually for $57,192 had been filed.  Stewart also brought to light at the May 2014 meeting that Badger Acquisition, better known as Omnicare of Henderson, KY had sued Phoenix in federal court and won their judgment.

Fortner also had the floor at that May 2014 council meeting apologizing and once again redirecting saying that Phoenix was a 5 star facility and falsely reporting the hospital was 85-90 percent complete.  She claimed the economic reinvestment in the community was 18 million dollars and that the state owed 1.4 million which would more than cover Phoenix’s debts.  Fortner was peppered with questions from council members and repeatedly deflected and answered that she had others working to prepare the answers to their questions.

Two weeks later at the May 19, 2014 City Council meeting, City Attorney Greg Stewart began by announcing a new lawsuit had been filed against Phoenix, this one by Select Rehabilitation, who provided rehabilitation services.  Select’s contract for payment hadn’t been met to the amount of $189,000 plus interest resulting in the suit.  Stewart also noted that in the past two weeks, he’d received none of the information or the general ledger that he’d requested and been promised back on May 5th.  By now, Phoenix was 4 years in default on their loan (around $360,000) to the city and owed $84,000 in utilities.  By now, the 1.4 million owed by the state (which only wasn’t paid to Phoenix because Fortner didn’t fill out the paperwork correctly) would barely pay all debts which were still rising.

Fortner continued the blame game while also taking a new angle as a victim at the May 19th meeting while Phoenix Board members David Campbell, Fred Smith, Keith Hoskins and Cindy Conley all remained absent and unwilling to discuss the problems.  Dr. Saqib who sits on the Foundation Board but not the financial side even came to Fortner’s defense insisting that she had put her own money into the facility along with her time and wasn’t being paid for it, even though she was taking on too many things.  Fortner was even unable to tell council members how much money Phoenix had on hand, but said that auditors had been brought in and would supply the city with financial information once they completed their findings.

Not until November would more information come out when the city formally decided to file suit against Phoenix.  By now, with interest the facility owed the city alone more than a half million dollars not including utility payments which were in arears.  The city for their part said they wanted to afford Phoenix enough time to find a buyer, catch up its payments or find another alternative plan to work with the city.  Attorney Greg Stewart would say at the November meeting that he had still yet to receive any of the documents or information he was waiting on and told he could have from Fortner, who incredibly remained on the job.

Finally, at the November 2014 meeting, David Campbell member of both the Phoenix Rehab and Nursing Board as well as the Foundation Board made an appearance and was quoted as saying, “the financial problems Phoenix has struggled with being made public have hurt the census of the facility, which in turn decreases revenue and makes the goal of restoring hospital services less likely.”  He remained steadfast that Phoenix wouldn’t file for bankruptcy, saying “a lot of people have a lot of money tied up in this” and urged city officials and Stewart to work with Phoenix rather than making the facility’s struggles public.  Campbell also went to bat for Fortner arguing that the paperwork that has been turned over was never enough and suggested that Stewart was just as guilty for not returning Fortner’s calls and requests to meet.

Campbell’s tune changed in January however as he showed up along with Phoenix Board member Cindy Conley for a meeting.  Fortner had finally been ousted as administrator…9 years and a month after assuming the role and 4 and a half years after Phoenix first began having financial issues and failed to make loan payments.  This time, instead of defending and arguing for Fortner, Campbell began his comments saying that the board had been “kept out of the loop” by Fortner and that he himself had in his 7 years on the board seen more paperwork in the past 20 days (since Fortner was let go) than he had in the past 7 years.

It was only after Fortner was sent packing that board members and new administrators were finally able to get a look at books.  And what they found was a garbled mess of bookkeeping.  Board member Cindy Conley, an accountant herself, said that part of the bookkeeping was done on one computer while another part was done on another computer.  To say documentation and records were a nightmare might be an understatement.  Even with the seeming disaster that had been left behind by Fortner and her administration, the January meeting was genuinely looked at as a positive step.

In the time between that January meeting and November 3rd, the new administration made some strides in public opinion and the census did receive boosts in residence.  It appears the financial mess that Fortner’s administration caused and allowed, the Phoenix Board’s lack of attention, ability and interest in regaining control over what proved to be a runaway, potentially inept, potentially criminal administration and to some degree the city of Carmi’s own unwavering optimism/hope proved too much to overcome.

So where do we stand today?  Phoenix Rehab and Nursing will no longer be a product of the foundation or the first step of a reborn Carmi hospital.  The Phoenix Foundation still exists, however.  The IRS, IDES and many others will still continue to pursue money they’re owed.  Eric Koester, the executive director has been laid off.  We also understand the FBI is investigating the Phoenix Foundation.  Carmi as a community has lost.

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