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Miracle Flights losses bad, could’ve been worse

It’s little solace for a local charity that lost $2.2 million in what civil court documents describe as a loan Ponzi scheme, but it appears things could have been much worse for Miracle Flights for Kids.

The charity that provides air travel for medically fragile children had agreed in general to loan a total of $5 million to Med Lien Management, Inc., a local company that purported to broker medical liens and promised to provide investors substantial interest in what it called a busy and underserved market. The $2.2 million loan was just the first stage of the deal.

After making the first few interest payments, the loan went into default. Med Lien’€™s Brad Esposito blames partner Lincoln Lee for fraud and gross mismanagement of the liens. A lawsuit filed on behalf of Medical Flights by attorney Peter Christiansen accuses Esposito and Lee of ripping off the charity. It’s an act that ought to have the attention of local and even federal law enforcement.

The losses could have been higher.

In late August of 2012, at a time the $2.2 million loan was cratering and the Med Lien office was a shambles, Esposito had something else on his mind: Getting access to another $3 million from the charity.

In an Aug. 22 email to Miracle Flights’€™ Vanessa Moreno, Esposito wrote in part: “€œIt am not trying to be difficult at all but Miracle Flights has put us in a bad position. Our agreement was to have access to funding up to $5,000,000. We were told that when we wanted to do another loan to give 30 days’€™ notice and it would be done. Based on this we set up accounts with several Providers that expect us to purchase liens on a monthly basis. We submitted a request to Mr. (then board Chairman Larry) Scheffler in January of this year. We were continually pushed back due to conflicts with Miracle Flights personnel.”€

Is there any reasonable way Esposito could have been in the dark? He was intimately familiar with the liens. Second, his wife, Lisa Esposito, Lee’s sister, was hired in June 2014 to write medical consultation reports and help in the Med Lien’€™s billing office, such as it was.

In a signed affidavit in which she blamed her brother for the company’€™s troubles, Lisa Esposito also wrote, “€œI began to help with the reports and soon realized that over 300 reports needed to be done and with each report a bill and records needed to be sent out. (These should have all been done weeks before.)”€

The business, such as it was, was hopelessly behind.

When Lisa Esposito asked questions of her brother, she got the runaround. “€œNo one was tracking the amount of outstanding liens that needed to be collected and the amount of bills that needed to go out,”€ she wrote. “Many files were mishandled and the billing was delayed for months, which started to cause collections to be virtually nothing.”€

Thousands of dollars due and owing were lost to mismanagement.

“€œLee and David Steinbrecher generated a report of outstanding liens in December 2014,”€ Lisa Esposito wrote. “€œThis report had many duplicated and fabricated amounts and patient names. This seriously affected the accounts receivables.”€

She called out the two men for claiming the database was “€œcorrupted.” She could see enough of the files to tell they were an awful mess.

Brad Esposito wasn’t shy about pressing Miracle Flights for more money, but his wife swore that the company was awash in lies, ineptitude and the stuff of fraud.

Does that sound like a business anyone could trust with an additional $3 million loan?

John L. Smith’€™s column appears Sunday, Tuesday, Wednesday, Friday, and Saturday. Contact him at 702 383-0295 or at jsmith@reviewjournal.com. Follow @jlnevadasmith on Twitter.

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