Miracle Flights for Kids caught up in loan fiasco
Miracle Flights for Kids provides free medical air travel for sick and injured children, but now it looks like the nonprofit has been taken for a very costly ride.
In a lawsuit filed in District Court, Miracle Flights sought and received a writ of attachment and garnishment issued against operators of Med Lien Management Inc., which in 2013 obtained a $2.2 million loan from the nonprofit.
The soured Med Lien loan has the telltale signs of fraud, according to the lawsuit. But at first glance it might have looked like a profitable investment. Miracle Flights was to receive interest totaling $1.3 million from Med Lien, which used what it claimed were medical liens valued at $3 million as collateral.
After receiving $660,000 in interest payments, the lien company defaulted on the loan.
In court documents, Med Lien owner/partners Lincoln Lee and Brad Esposito are accused of misrepresenting the value of the medical liens they used as collateral for the loan, which including interest is now $2.8 million and climbing.
In response to the default notice, Med Lien attorney Christopher McCullough emailed Miracle Flights Chief Financial Officer John Barry: "Unfortunately it appears that our client has been the victim of a devastating fraud by a former employee. Hundreds of thousands of dollars has been removed from the company‘s accounts without authorization and our client‘s computer files appear to have been intentionally corrupted." The email also said Metro police had "opened a criminal investigation" in the matter.
Med Lien informed police of the purported fraud that occurred in the company, the lawsuit alleges, only after Miracle Flights notified Med Lien that it was in default on the loan. For his part, Esposito "inexplicably made no attempt to involve law enforcement for a period of five months after learning of the fraud and missing funds," the suit claims.
In an affidavit, Barry stated the loan agreement was reviewed by outside attorneys and accountants before being approved by the board of directors. Just how much due diligence was conducted remains unclear, according to court documents.
One thing that seems certain is that a large percentage of the loan is unlikely to be repaid. Through attorney Peter Christiansen and Kendelee Leascher Works, Miracle Flights has begun to garnishee what assets it can locate.
Compounding the problem is a lack of available corporate bookkeeping records for Med Lien, which purportedly purchased the liens used as collateral for the loan from Southern Nevada Medical Associates (SNMA). Esposito would know something about the business practices of SNMA, as he‘s also listed as the director, president and treasurer of that company.
Through counsel, Esposito alleges that his partner, Lee, "intended to defraud Med Lien investors ‘from the beginning,‘" the lawsuit states. Lee is accused of using Med Lien funds on "jewelry, home utility bills, colon cleanses and a $115,000 dune buggy."
"Esposito further reported to LVMPD that, ‘Lee has not turned over the list of liens that he purchased, stating that the data was corrupted. The company has no idea of the amount of assets that it does or doesn‘t hold. It is firmly believed that Lincoln Lee has this info.‘"
The trouble for Esposito is, he never bothered to sue Lee. And there‘s the undeniable fact that the purported collateral liens were purchased from SNMA, a corporation for which Esposito is the sole director and officer.
"In short, Esposito‘s self-proclaimed inability to access any lien documentation or information is at best, disingenuous and at worst, an outright fabrication," the lawsuit alleges.
It‘s clear that someone associated with the Miracle Flights loan deserves to be grounded.
John L. Smith‘s column appears Sunday, Tuesday, Wednesday, Friday, and Sunday. Reach him at 702 383-0295 or at jsmith@reviewjournal.com. Find him on Twitter: @jlnevadasmith.
