Three clinics at center of hepatitis outbreak file for bankruptcy

The three medical clinics at the center of last year's hepatitis outbreak filed for bankruptcy Friday, a move that threatens to delay the first civil trial involving a patient infected with hepatitis C.

The Endoscopy Center of Southern Nevada, Gastroenterology Center of Nevada, and Desert Shadow Endoscopy Center all filed for Chapter 7 bankruptcy, which calls for liquidation of any corporate assets.

The Southern Nevada Health District has genetically linked nine cases of hepatitis C to unsafe injection practices at the endoscopy centers. An additional 105 cases are possibly related.

The centers are named in lawsuits from patients who say they contracted hepatitis C and other blood-borne diseases because of unsafe injection practices at the clinics.

The bankruptcies automatically postpone any lawsuits involving the clinics, and a bankruptcy judge must lift the postponement before the civil suits can proceed.

The first trial in the mountain of litigation surrounding the hepatitis outbreak is scheduled to begin Oct. 19 in District Court. The plaintiff, Michael Washington, is a patient whose hepatitis C has been genetically linked to the Endoscopy Center of Southern Nevada.

His lawyer, Ed Bernstein, said the bankruptcy filings are the latest delaying tactic by lawyers representing the clinics and doctors.

"It's another way to stop testimony, and stop the process, and tie things up again," Bernstein said. "It's been their course of conduct the entire case."

How quickly the issue is resolved depends on whether the clinics' lawyers agree to drop the postponement or fight to keep it, he said.

One lawyer representing the clinics, Bruce Thomas Beesley with the firm Lewis and Roca, was unavailable for comment Monday.

Nancy B. Rapoport, a Boyd Law School professor, said the clinics have "the Cadillac of bankruptcy firms."

The bankruptcy papers were signed by Dr. Kusum Desai, acting as the attorney for her husband, Dipak Desai, the businesses' general partner.

Trustee Brian D. Shapiro, who will act as a middleman in the bankruptcy cases, said he would likely want to question Dipak Desai about the companies' assets at an Aug. 24 creditors meeting because of his ownership stake.

But that might not happen because of questions about his mental capacity following a stroke a year ago.

The issue of his competence to handle legal matters has already arisen before the Nevada State Board of Medical Examiners. The board has ordered testing to determine if he can assist his defense against possible action against his medical license.

All three clinics shut down shortly after the health district's February 2008 announcement that 40,000 patients might have been exposed to hepatitis C, HIV and other blood-borne diseases because of unsafe injection practices. Two months later, another 10,000 patients received the same notification.

Health officials blamed the outbreak on nurse anesthetists reusing single-dose medicine vials between patients. The vials, they say, became contaminated when nurses would use a syringe more than once on the same patient. A city of Las Vegas report said Desai ordered his nurses to reuse the medicine to save money.

Will Kemp, a lawyer for former clinic patients, said the bankruptcies shouldn't affect the money available to them.

"I don't think this will have any long-term impact because no one thought they had any assets to pay anyway," he said.

The Endoscopy Center of Southern Nevada listed $35,079 in assets and $303,256 in liabilities. It saw its gross income fall from $6.9 million in 2007 to $68,993 this year.

The gastroenterology center listed $4.6 million in assets, of which $4.4 million was uncollected patient and insurance bills. It listed $667,073 in liabilities. Notable debts included $18,000 to public relations firm R&R Partners and more than $258,000 in loans from its sister clinics.

The gastroenterology center's gross income fell from $11.1 million in 2007 to nothing this year.

The Desert Shadow clinic listed $176,237 in assets and $279,947 in liabilities. Its gross income fell from $3.6 million in 2007 to $23,550 this year.

Together, the three companies have paid Lewis and Roca more than $408,000 in legal fees since August.

All three companies were also involved in pending lawsuits for breaking rental agreements and leaving more than $725,000 in unpaid rent. An Aug. 6 hearing was set for a motion to rule in favor of the landlords, DesMed LLC and Gold Shadow Properties LLC.

Rapoport, the law professor at the University of Nevada, Las Vegas, said the lack of assets reminded her of the lyrics of an old Stevie Wonder song, "Nothing from nothing leaves nothing."

"It's a very sad affair," she said. "People are harmed from what happened at these places, but there's no money from them to help these people out."

Contact reporter Brian Haynes at bhaynes or 702-383-0281. Contact reporter Paul Harasim at or 702-387-2908.