Sen. Vitale Sponsors Legislation Expediting Muhlenberg Asset Transfers

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MI - Sen Vitale Releases Legislative Motives for Muhlenberg Closure

Muhlenberg Foundation Financial Review

Muhlenberg Foundation Inc.

Review of 12/31/2008 & 12/31/2007 Forms 990

In 2007, the Muhlenberg Foundation made payments to the Muhlenberg Regional Medical Center of $5,571,490, which included the transfer of stock of the Midtown Shops Corporation, a firm that has extensive holdings of commercial real estate. The Muhlenberg Foundation received the Midtown Shops stock as a pledge from the Harold B. & Dorothy A. Snyder Foundation in 2007 and valued it on their books at $4,712,976, which included $208,570 in cash. Prior to the stock being controlled by the Muhlenberg Foundation, the Snyder Foundation received a yearly dividend of $109,000 from the Midtown Shops Corporation. The transfer resulted in 30.4 percent of the net assets of the Muhlenberg Foundation being transferred to the Muhlenberg Regional Medical Center. The purpose of this transaction needs to be questioned. Was it done in good faith? Why was Midtown Shops stock transferred from the Muhlenberg Foundation to the Muhlenberg Regional Medical Center within months after the Foundation received the total pledge, which was settled over a period of three years. We question how the income from the Midtown Shops is reflected on the Muhlenberg Regional Medical Center Return for the years ending December 31, 2007 and December 31, 2008.

The closing of the Muhlenberg Regional Medical Center (MRMC) acute care hospital by Solaris Health Systems in August of 2008 violated the original Articles of Incorporation, which clearly states that the sole purpose of the organization is “to provide a hospital for the residents of Plainfield, New Jersey.” The Muhlenberg Foundation was formed to operate exclusively for the benefit of the Muhlenberg Hospital and was the principal fundraising arm of the hospital. Thus, the closing of the hospital left the Muhlenberg Foundation without a hospital to support in Plainfield, New Jersey. The statement of Program Service Accomplishments on the Muhlenberg Foundation Form 990 for 2008 now states the Foundation is “to engage in programs and activities for the benefit of Solaris Health Systems.” This is a drastic change from the purpose as stated in the Foundation’s Articles of Incorporation. The change was made prior to a New Jersey Appellate Court hearing challenging the closing of the Muhlenberg Regional hospital.

The Attorney General under Governor Jon Corzine failed to protect the interests of the Muhlenberg Foundation and the 13 communities serviced by the Muhlenberg Regional Medical Center when it stood silent and allowed the Muhlenberg Hospital to close. The closing of the hospital terminated the purpose of the Foundation. Did Solaris Health Systems, the Muhlenberg Regional Medical Center, or the Muhlenberg Foundation notify the Attorney General or the Surrogate Court of the hospital’s closing or seek direction as to the disposition of its assets? The net assets of the Muhlenberg Hospital were reduced by 1,026%!! Net assets in the beginning of 2008 were $5,238,417 and at the end of the year they were (-$53,788,837). The $55,808,594 loss from discontinued operations was charged against unrestricted net assets and needs to be verified by a complete audit of the return. (The discontinued operations loss was primarily the acute care hospital income and operating expenses for the period January 1, 2008 through August 2008). However, included in net assets of the Muhlenberg Regional Medical Center was $1,875,325 in perpetual trusts. The health services rendered at the Muhlenberg Regional Medical Center have been reduced to a bare minimum, which resulted in the constructive closure of the hospital facility. The remaining health services are:
a. Home Health Care (Per 2008 Form 990 for MRMC, Home Health Care receives 45% of the revenue from non-acute care hospital sources of income)
b. School of Radiology
c. A small satellite Emergency Room that will close in 3.5 years
d. minimal outpatient services
e. A limited X-ray department that does CAT scans twice a week.

As of December 31, 2008, the net assets of the Muhlenberg Foundation were $7,597,236. This includes $2,950,583 in investments in publically traded securities and $1,767,663 in beneficial interest in perpetual trust. Included in this total was $1,640,356 in assets described on the Balance Sheet as “Assets whose use is Limited”? A specific analysis needs to be completed in order to determine the nature and purpose of assets classified as “Assets whose use is Limited”.

Other Issues requiring resolution by independent review of the Forms 990 for the years ending 12/31/2007 and 12/31/2008 are as follows
:
1. Why did the Investment Income on Form 990 of the Muhlenberg Foundation decrease from $330,625 in 2007 to $4,563 in 2008?
2. Why did the investments in publicly traded securities on Form 990 of the Muhlenberg Foundation decline from $5,803,443 in 2007 to $2,950,583 in 2008?
3. Determine reason(s) for the large decrease in net assets of the Muhlenberg Foundation from $9,760,931 in 2007 to $7,597,236 in 2008.
4. Form 990 - Part 5, question 6a - Did the organization solicit any contributions that were not tax deductible? The “yes” box was checked. From whom and for what reasons were these contributions solicited?
5. Form 990 - Part 5, question 7a – Did the organization provide goods or services in exchange for any quid pro quo contribution on more than $75.00? The “yes” box was checked. What were the goods and services provided and why was it considered a quid pro quo transaction?
6. Form 990 - Part 6, Section A, question 7a – Does the organization have members, stockholders, or other persons who may elect one or more members of the governing body? The “yes” box was checked. The Foundation was established to support a hospital in Plainfield, New Jersey, which is located in Union County. If the control of the governing body is transferred outside of Plainfield and Union County, the community may have been harmed by decisions from a Board of Directors without ties to Plainfield, New Jersey or Union County.
7. Form 990 - Part 6, Section A, question 7b – Are any decisions of the governing body subject to approval by members, stockholders or other persons? The “yes” box was checked. The issue in item 7b is the same as in item 7a; were the decisions by the Board of Directors compromised by persons not living and associated with the Plainfield community and Union County?
8. Why were $229,892 (2007) and $74,095 (2008) of net assets released from restrictions for use in operations on the Foundation’s Form 990?
9. What was the $464,370 unrealized gain from investments other than trading securities on the Foundation’s Form 990 for 2008?
10. The issues as reflected in items 6 & 7 above are also present on the 2008 Form 990 of the Muhlenberg Regional Medical Center.
11. What systems are in place in order to protect the Muhlenberg Foundation’s Perpetual Trusts of $1,767,633 and the Muhlenberg Regional Medical Center’s Perpetual Trusts of $1,875,325? Are the terms of the trust instruments being followed?
12. A review of the Forms 990 of the Plainfield Neighborhood Health Center shows that Muhlenberg Regional Medical Center loaned the PNHC $2,040,000 in 1997. It also indicates that this loan was paid off in 2004; however, was this transaction ever recorded in the Union County, NJ County Clerk's office? If not, why?

It appears that Solaris Health Systems has developed a corporate culture, led by management and acquiesced by the Trustees of the Muhlenberg Regional Medical Center and the Muhlenberg Foundation, Inc., that the delivery of health care is best left exclusively to the sole judgment of management. This resulted in the acute care hospital being closed, assets being liquidated, and tangible personal property, such as beds and medical equipment being transferred to other related Solaris entities prior to the Appellant Court’s decision in a case challenging the Commissioner of Heath and Senior Services’ decision to terminate the Muhlenberg Hospital’s Certificate of Need. It should have been the New Jersey Attorney General’s function to oversee the Muhlenberg institutions and protect its charitable assets. In Connecticut, the Attorney General intervened in a situation involving an acute care hospital facility abandoning its historic core mission as an acute care facility to become an ambulatory care facility with an emergency room. There, the hospital trustees voted to close in-patient care and lay off related medical support staff. The Connecticut Attorney General’s Office contended that such a fundamental transformation required cy pres action, and the court agreed. In New Hampshire the Attorney General is a necessary party in any proceeding involving cy pres, or deviation or termination of charitable trusts. Finally, we need the New Jersey Attorney General to oversee and protect the medical needs of Plainfield, a minority community.

The Dismantling of Muhlenberg Regional Medical Center, Plainfield, NJ, 07060

What is Midtown Shops?


Property located in Kenilworth, New Jersey and falls under two listings:

Boulevard Shops Inc.
480-496 Boulevard, Block 80, Lot 1, Kenilworth Boro, in Union County, NJ

Midtown Shops Inc.
500-506 Boulevard, Block 81, Lot 1, Kenilworth Boro, in Union County, NJ

2006

Boulevard Shops, Inc.
480-496 Boulevard, Block 80, Lot 1, Kenilworth Boro, in Union County, NJ

Tax Record address: P.O. Box 671, Moorestown, NJ 08057

Midtown Shops Inc.
500-506 Boulevard, Block 81, Lot 1, Kenilworth Boro, in Union County, NJ

Tax Record address: P.O. Box 671, Moorestown, NJ 08057

Source: Tax Records - Kenilworth, NJ Tax Office

2007

"During 2007, the Foundation [Muhlenberg Foundation] transferred to MRMC the Snyder Foundation pledge which included the Midtown Shops property in the amount of $4,712,976."

Source: Muhlenberg Regional Medical Center, Inc. Consolidated Financial Statements for the years ended December 31, 2007 and 2006 and Independent Auditor's Report, page 30.

"During 2007, the Foundation transferred to MRMC the Snyder Foundation pledge which included the Midtown Shops Property. Once MRMC closed on the property, Midtown Shops became a wholly-owned MRMC subsidary."

Source: Muhlenberg Regional Medical Center, Inc. Consolidated Financial Statements for the years ended December 31, 2007 and 2006 and Independent Auditor's Report, page 8.

Question: "Once MRMC closed on the property...", where is the recorded deed?

Sometime in 2007, the tax record address changed to 98 James Street, which is the address of record on IRS Form 990 for Solaris Health Systems, Inc.

On the 2007 IRS Form 990 for Solaris Health Systems, Midtown Shops is listed as a non-exempt related organization, page 33.

Boulevard Shops, Inc.
480-496 Boulevard, Block 80, Lot 1, Kenilworth Boro, in Union County, NJ

Tax Record address: 98 James Street, 4th floor, Edison, NJ

Midtown Shops Inc.
500-506 Boulevard, Block 81, Lot 1, Kenilworth Boro, in Union County, NJ

Tax Record address: 98 James Street, 4th floor, Edison, NJ

Source: Tax Records - Kenilworth, NJ Tax Office


2008

2/11/08 File date on deed for the three way subdivision of the Muhlenberg property located at
Park and Randolph Road. Source: Union County , NJ Land Records

2/13/08 Change of Agent and Officers Midtown Shops, Inc.
Address: Solaris Health Systems
80 James Street
Edison, NJ 08820


9/04/08 Notice of Settlement

between Kenilworth Equities, LLC., Mortgagor, and Investors Savings Bank , Mortgagee,
and the lands to be effected are commonly known as:

480-496 Boulevard, Block 80, Lot 1, Kenilworth Boro, in Union County, NJ
500-506 Boulevard, Block 81, Lot 1, Kenilworth Boro, in Union County, NJ


Source: Union County Clerk Office Notice of Settlement filing # 270939


11/04/08 Notice of Settlement

between Midtown Shops, Inc. and Boulevard Shops, Inc., Seller, and Kenilworth Equities, LLC., Buyer,
and the lands to be effected are commonly known as:

480-496 Boulevard, Block 80, Lot 1, Kenilworth Boro, in Union County, NJ
500-506 Boulevard, Block 81, Lot 1, Kenilworth Boro, in Union County, NJ

Source: Union County Clerk Office Notice of Settlement filing # 272721

11/04/08 Notice of Settlement

between Kenilworth Equities,LLC., Mortgagor, and Investors Savings Bank , Mortgagee,
and the lands to be effected are commonly known as:

480-496 Boulevard, Block 80, Lot 1, Kenilworth Boro, in Union County, NJ
500-506 Boulevard, Block 81, Lot 1, Kenilworth Boro, in Union County, NJ


Source: Union County Clerk Office Notice of Settlement filing # 272722

Justice Delayed Is Justice Denied

AGTrustsand EndowmentsLetter2P

Special Request Post From MuhlenbergIndependent Archives

NJ Healthcare Facilities Financing Authority MRMC - JFK Hospital Bond Issues

October 30, 2010


RE: Muhlenberg Regional Medical Center Property
Plainfield, New Jersey

A recent newspaper article (enclosed) detailed vague discussions concerning the development of the Muhlenberg Regional Medical Center property located in Plainfield, NJ.

Since the State of New Jersey holds the $152,925,000 State Contract Bonds (Hospital Asset Transformation Program) on the total Muhlenberg property issued by the New Jersey Health Care Facilities Financing Authority with the Bank of New York Mellon, as Master Trustee, the State of New Jersey should be an interested party and participate in the ongoing discussions in order to fully protect the public interest.

Muhlenberg Regional Medical Center was closed in 2008, by the former Commissioner of Health and Senior Services Heather Howard. (July 29, 2008, closure letter)

The New Jersey State Legislature passed a bill to allow for the bonding to go through even though the court challenge was not adjudicated. In October, 2008, the New Jersey Health Care Facilities Financing Authority approved the $152,925,000 State Contract Bonds in the Hospital Asset Transformation Program.

According to papers filed in the County of Union Clerk's office, the $152.9 million bond note is secured by the Muhlenberg property only and does not impact The Community Hospital Group, Inc. [Please note that at one of the hospital annual meetings, it was stated that there is also a $17 million mortgage on the Muhlenberg property, but research can not substantiate that as a fact.]

The Plainfield area residents lost healthcare for a supposedly $18 million loss, but the Muhlenberg assets have been leveraged to provide $152.9 million to another entity.

Regardless, the State of New Jersey needs to be aware of this development in order to protect the State's interest.

[updated 07/04/2011]

A search as of yet has not been done of the papers filed in the County of Middlesex; however,
according to the NJHCFFA (NJ Health Care Facilities Financing Authority) October 23, 2008 Meeting Minutes, page 6,

"The proceeds of the financing will be used to : refund the the Authority's Variable Rate Composite Program - JFK Medical Center Project Series 2005 A-3; refund the Authority's Variable Rate Composite Program - Community Hospital Group Series 2003 A-1; refund the Authority's Muhlenberg Regional Medical Center Issue, Series 2000; refund the Authority's JFK Medical Center/Hartwyck at Oak Tree Obligated Group Issue, Series 1998; refund the Authority's JFK Health Systems Obligated Group Issue, Series 1995: refund the Authoriity's JFK Health Systems Obligated Group Issue, Series 1993; fund capital improvements at the JFK Medical Center related to the closure of Muhlenberg; fund capital interest; and pay related costs of issuance."

The $152.9 million was leveraged to refund 5 JFK related bonds and only 1 of Muhlenberg bonds.

Minutes of the New Jersey Health Care Facilities Financing Authority meeting held on October 23, 2008 on the fourth floor of Building #4, Station Plaza, 22 South Clinton Avenue, Trenton, New Jersey.
NJHCFFA October 23, 2008 Meeting Minutes p. 6

B. JFK Medical Center Obligated Group
Mr. Escher stated that the following portion of the meeting will be considered a public hearing in connection with the proposed issuance of bonds on behalf of JFK Medical Center Obligated Group. This hearing took place in accordance with the public notice and approval requirements of Section 147(f) of the Internal Revenue Code of 1986, as amended.
As a public hearing, Mr. Escher welcomed everyone to participate in the discussion, but first asked Mark Hopkins and Bill McLaughlin to bring the Members up to date on the transaction.

Mr. Hopkins took the opportunity to provide a brief background of the purpose of the TEFRA Hearing, the specific financing program, and the Authority’s action at this meeting. He stated that the Authority will consider authorizing, with certain contingencies, a financing for three borrowers: The Community Hospital Group, Inc. which does business as JFK Medical Center, Hartwyck at Oak Tree, Inc., and Muhlenberg Regional Medical Center. These borrowers will be referred to going forward as the JFK Medical Center Obligated Group. He also noted that reference may be made to Solaris Health System, which is the borrower’s corporate parent.

The financing that is being considered for the JFK Medical Center Obligated Group is a type of financing authorized by the State’s Hospital Asset Transformation Program (“HATP”), which is part of the Authority’s enabling legislation, and which permits the State to pay principal and interest on the bonds, subject to appropriation, if certain criteria are met. It should be noted that the JFK Medical Center Obligated Group will be required, under a loan agreement (secured by a mortgage), to pay an amount equal to the principal and interest on the bonds to the Authority. The Authority will then pass those payments on to the State Treasurer, making the transaction revenue neutral to the State.

The HATP was established in 2000 after it became clear that the state had several over-bedded areas that negatively impact the financial operations of the other hospitals in the area. A 1999 State Commission recommended that the closure of one or more hospitals may strengthen the healthcare delivery system as a whole. Therefore, one of the criteria to use the program is the closure of acute care services at a specific location. The State-backing was recommended as a result of the recognition that the stranded indebtedness of the closed hospital may cause undue financial distress to surviving hospitals in its system.

While the Authority is empowered to issue bonds under the HATP, it is not involved in making the decision on whether or not a hospital can close its acute care services. That decision is made at the Department of Health and Senior Services through the Certificate of Need process. In this case, the Commissioner has approved the Certificate of Need Request to close acute care services at Muhlenberg Regional Medical Center with numerous conditions that must be met by the JFK Medical Center Obligated Group and the Solaris Health System.

Under the Internal Revenue Code, a public hearing is required when tax exempt bonds are issued to benefit non-governmental entities. As such, the Authority is conducting this hearing to provide an opportunity for the public to comment on the proposed issuance of tax-exempt bonds for this project.

Bill McLaughlin then introduced Richard Smith – Senior Vice President and Chief Financial Officer from JFK Medical Center Obligated Group (“JFK”).
He stated that staff has been working on a financing for the benefit of JFK under the HATP. The elimination of acute-care services at the Muhlenberg Regional Medical Center (“Muhlenberg”) meets the eligibility requirements for using the Program. The Treasurer has approved entering into a contract with the Authority, which will provide the security for a bond issue approximating $169 million. JFK will enter into a loan agreement with the Authority, which provides the covenants under which JFK agrees to pay the debt service on the bonds.

He noted that a request for a Certificate of Need to terminate acute-care services at Muhlenberg was filed and a Certificate of Need was granted for the closure on July 29, 2008.

The proceeds of the financing will be used to: refund the Authority’s Variable Rate Composite Program - JFK Medical Center Project Series 2005 A-3; refund the Authority’s Variable Rate Composite Program – Community Hospital Group Series 2003 A-1; refund the Authority’s Muhlenberg Regional Medical Center Issue, Series 2000; refund the Authority’s JFK Medical Center/Hartwyck at Oak Tree Obligated Group Issue, Series 1998; refund the Authority’s JFK Health Systems Obligated Group Issue, Series 1995; refund the Authority’s JFK Health Systems Obligated Group Issue, Series 1993; fund capital improvements at the JFK Medical Center related to the closure of Muhlenberg; fund capitalized interest; and pay related costs of issuance.

Given that the working group worked to finalize documents over the past week, the documents provided in the mailing package to the Members had been adjusted. Specifically, the Bond Resolution has been updated to reflect the following changes:

Specific authorization for staff to solicit and purchase advertising to support this transaction, if necessary;

Contingencies related to interest rates and underwriter discount;

Expanded redemption provisions that include a “make whole” premium; and,

(added by Mr. Hancock) Additional limitations on the disbursement of funds related to the new money proceeds.

He then asked bond counsel to present the Bond Resolution.

NJHCFFA October 23, 2008 Meeting Minutes p. 7