Maneuvering continues to secure Desai assets
As Dipak Desai defends himself against charges of criminal misconduct in his former medical practice, his household furniture might be sold at auction.
Attorney William Leonard, the trustee in the former doctor’s Chapter 7 liquidation case, has asked for U.S. Bankruptcy Court permission to sell everything from bedroom and dining room sets to a red, white and blue elephant that once stood in his home office. The auction, tentatively set for Nov. 20, would gross nearly $28,000 by the estimate of Ultimate Auctioneers.
Leonard could not be reached for comment, but the sale probably will be little more than symbolic retribution for hundreds of creditors seeking compensation for improper use of medical equipment that caused an outbreak of Hepatitis C. Under bankruptcy law, Desai would be allowed a $17,000 exemption, and the auctioneer will collect a 30 percent commission, leaving little for creditors.
Far more significant financially is the complex legal maneuvering concerning Hari Om, a family partnership that listed $8.9 million in assets as of Aug. 31. Both Leonard and Nevada Mutual Insurance Co., the malpractice carrier that has paid out undisclosed settlements to Desai patients, claim the money even as the Desai family is trying to pull Hari Om out of bankruptcy.
U.S. Bankruptcy Court Judge Mike Nakagawa has scheduled a Nov. 1 hearing on the claims and will hear the auction request on the same day. If Leonard is allowed a chance to collect Hari Om money, attorney Brian Shapiro, the trustee for the bankrupt corporate entities that owned the Desai clinics, then will make a claim.
“I don’t think the average person cares who writes the check as long as they get something,” Shapiro said.
Earlier this year, Shapiro collected $2.6 million on a settlement reached with Nevada Mutual. But, depending on the fate of hundreds of thousands of dollars in legal bills awaiting a court ruling, he might have little left for creditors.
The task of retrieving the voluminous medical records for patients also was expensive, Shapiro said.
Hari Om, named in part for a sacred Hindu chant, is a collection of various investments with no debt listed against them. Because of improving financial markets, their value has risen 20 percent in the 18 months since the case was filed, according to court documents.
In July, Hari Om settled with dozens of Desai patients, many who were not infected with Hepatitis C, for $95,000. At that point, John Hansen, the San Francisco attorney representing Hari Om, asked to dismiss the case because it had become a bankruptcy with no creditors.
Then, Leonard and Nevada Mutual jumped in to assert themselves as creditors. Leonard moved Wednesday to examine nine people and companies tied to Hari Om to try to decipher its exact function.
Hansen said Hari Om was an estate planning tool with all but 2 percent of the ownership divided among Desai’s three daughters. Though it collected management fees from Desai’s Endoscopy Center, wrote Hansen in court papers, “there is no evidence that (Hari Om) engaged in any actions or activities that caused harm to any of the patients of the Endoscopy Center.”
But Leonard and Nevada Mutual have argued that the legal lines drawn around Hari Om were either blurry or nonexistent. In particular, Nevada Mutual pointed to testimony by Desai’s wife, Dr. Kusum Desai, who said he largely controlled the fund and even pulled out money to cover mounting legal bills.
“The facts indicated that Desai has used Hari Om as his own personal piggy bank in the past, and nothing will stop him from doing so in the future,” Nevada Mutual attorney Cecilia Lee wrote.
By removing court supervision in a Chapter 11, they fear that many of Hari Om’s assets would be siphoned beyond the reach of creditors.
Contact reporter Tim O’Reiley at toreiley@
reviewjournal.com or 702-387-5290.