Finances a mess, Med Lien moved into GOP offices

Despite the $2.2 million loan it had scored from a local children's charity, Med Lien Management's finances were a shambles in early 2014 when co-owner Brad Esposito decided to move the office.

On Jan. 25, Esposito wrote a letter to investors on Med Lien stationery that surely gave them confidence their money was still secure with the fledgling medical bill collection outfit. It was clearing out its Rainbow Boulevard location in favor of a better-connected space.

"I just wanted to let you know that some of our contact information has changed," Esposito began. "Our office is now located at 500 S. Rancho Drive Suite 7, Las Vegas NV 89106. ... I have moved the physical office to the Nevada Republican Party Headquarters in an effort to help the Party. I am the Fundraising Director and Senior Advisor to the Chairman. This by no means affects Med Lien Management or its operations. ..."

It's unclear how much help Esposito actually provided to the Republican Party, but he was no stranger to the office. His close friend and business associate in the medical lien company is Nevada Republican Party Chairman Michael McDonald, who was on the board of Las Vegas-based Miracle Flights for Kids when it voted to award Med Lien Management a $2.2 million loan.

The loan defaulted in 2014. Attorneys for Miracle Flights have sued Med Lien's management and are pursuing co-owner Lincoln Lee into bankruptcy in an effort to recover assets from an alleged Ponzi scheme run in part out of state Republican Party headquarters.

McDonald said in a recent interview he didn't misrepresent himself or his relationship with Med Lien because he didn't vote on the loan, which was approved in April 2013 with votes from two of his longtime friends. He denied receiving a finder's fee for connecting his pal's company with the charity, and also denied introducing Esposito to the Miracle Flights board. He did say he began working as a "government affairs consultant" for Esposito shortly after the loan was made.

But for some reason he failed to disclose that his friend Esposito had operated the med lien business out of Republican Party headquarters while serving as "Fundraising Director and Senior Advisor to the Chairman."

A five-page company ledger recovered by attorney Peter Christiansen in the civil case shows McDonald receiving a $140,000 "Shareholder loan" on July 31, 2014. McDonald denied receiving a loan from the company: "It wasn't a loan. I declared it on my taxes."

Is that perhaps because, contrary to his previous statements, the GOP chairman and former Las Vegas City councilman did receive a finder's fee?

And if McDonald didn't introduce Esposito to the five-member charity board, who did? One of McDonald's cronies?

Repeated attempts to reach McDonald and Esposito Friday were unsuccessful.

These days Lee finds himself wading through deepening waters in U.S. Bankruptcy Court, where he's listed Miracle Flights as a $3.52 million creditor (the original $2.2 million plus interest.) Lee is accused by Esposito of running the company into the ground and spending assets — including the loan proceeds — on extravagances such as jewelry and a $115,000 dune buggy. After the loan defaulted and Miracle Flights contacted an attorney, Esposito called Metro to report the issue.

Did former Metro officer McDonald give Esposito that advice?

In an act of due diligence days before making the loan, Miracle Flights secured an attorney's opinion, which in part said the investment was legal as long as it didn't violate the applicable sections in the Internal Revenue Code for 501(c)(3) nonprofit organizations. The deal would be exempt from taxation, the April 8, 2013, letter states, "as long as no part of its net earnings inure to the benefit of any private shareholder or individual and the corporation's activities are not substantially related to 'carrying on propaganda or otherwise attempting to influence legislation,' or participate in or intervene in, a political campaign."

Med Lien officials not only defaulted on the loan, but despite that clear warning they may have endangered Miracle Flights' nonprofit status.

On Jan. 25, 2014, Esposito ended his investor letter with, "We look forward to another outstanding year and are happy to have you as part of the Med Lien Management family." It's becoming clearer that some members of that dysfunctional family made a score off a children's charity.

And some of the shabby business was run out of Republican Party headquarters.

John L. Smith's column appears Sunday, Tuesday, Wednesday, Friday, and Saturday. Contact him at 702-383-0295, or jsmith@reviewjournal.com. On Twitter: @jlnevadasmith.