Prisoners Aim to Toss Medical Provider’s ‘Two-Step’ Bankruptcy

A prison healthcare provider bankruptcy should be tossed after using a controversial legal strategy to fraudulently transfer millions of dollars away from tort victims to equity holders, medical malpractice claimants said.

A “structured dismissal” of Tehum Care Services Inc.'s Chapter 11 would allow claimants to sue insiders, affiliate YesCare Corp., and other related non-bankrupt entities and receive more money “than they will ever be paid in this Chapter 11 Case,” a tort claimant committee representing prisoners told the US Bankruptcy Court for the Southern District of Texas in a motion Tuesday.

“By creating an administratively insolvent estate, incentivizing professionals to ...