Businessman, former hospital CEO will be arraigned today in Oxford

By Billy Davis

An arraignment is set for today in U.S. District Court in Oxford for Ray Shoemaker, the former CEO at Tri-Lakes Medical Center (TLMC), and for Batesville businessman Lee Garner.

A federal indictment, with 10 counts in all, was handed down February 24 by a federal grand jury seated in Oxford, home of the U.S. District Court of North Mississippi.

U.S. District Court documents allege Shoemaker demanded $25,000 for increasing nursing services at Tri-Lakes Medical Center for Garner.

Authorities allege Shoemaker received about half that amount, with former County Administrator David Chandler allegedly using his own “bribe money” from Garner to pay Shoemaker.  

The indictment reads, “Garner and Chandler agreed that Chandler would pay the bribe and kickback to Shoemaker out of the bribe money that Garner was paying directly to Chandler.”

That allegation is but one account of alleged kickbacks, conspiracy, fraud and embezzlement that are contained in a 21-page federal indictment.

The FBI and U.S. Attorney’s Office announced the indictments March 16, also making public a joint investigation with the United States Department of Agriculture.

The federal indictment was unsealed March 15, after Shoemaker and Garner were arrested.

Shoemaker, 38, faces up to 80 years in prison and $2.5 million in fines if convicted on all counts, according to U.S. Attorney John Marshall Alexander.  

Garner, 66, faces up to 25 years in prison and $1 million in fines.

Both defendants have been released on $50,000 secured bond.

Chandler is described as a co-conspirator in the indictment but has not been indicted by grand jurors.

The federal investigation alleges Garner paid Chandler $5 per hour for each hour of billed nursing service at the Batesville hospital — approximately $268,000 over two years according to the indictment.  

Chandler allegedly served as middleman for Garner and Shoemaker, then the CEO at Tri-Lakes, by convincing Shoemaker to use Garner’s Guardian Angel Nursing and, later, On-Call Staffing.

On page four of the indictment, court documents describe how in 2006 Chandler allegedly began paying Shoemaker from his own pool of kickback money from Garner.

Shoemaker may have had good reason to demand more money as alleged: the alleged kickback scheme at the hospital had put more than $50,000 in the hands of David Chandler by the fall of 2005, with more money on the way.

Chandler was faring much better than Shoemaker, whose price for using Garner’s nursing service had been a $50,000 raise in his annual salary, according to the indictment, which Chandler had allegedly arranged when he oversaw the hospital’s Board of Directors before Tri-Lakes was sold.

In November 2005 the trio of alleged co-conspirators met at a Como restaurant, where investigators claim Garner asked Shoemaker for a “greater share” of nursing hours, according to the indictment.

Shoemaker in turn demanded money for increasing the nursing hours.

The indictment states, “Shoemaker had upheld his part of the agreement with Garner to increase TLMC’s use of Garner’s nursing service and he wanted Garner to uphold his agreement to pay Shoemaker $25,000.”

Garner and Chandler, facing Shoemaker’s demand, agreed that Chandler would pay from his own “bribe money,” the indictment alleges.

The indictment alleges Chandler paid Shoemaker approximately $12,000 toward the $25,000 from January to July in 2006.

The indictment goes on to allege that Shoemaker denied ever receiving payments from Chandler, when he was questioned by FBI agents in October 2009.

The agents returned, five months later, with copies of Chandler’s checks. Shoemaker then claimed he had borrowed the money from Chandler.

Agents have since charged Shoemaker with making false statements to them.

Six other federal counts include: one count of conspiracy to commit kickbacks and bribes; two counts of committing kickbacks and bribes; one count of conspiring to commit healthcare fraud; and two counts of committing healthcare fraud.

Counts eight and nine:

the line of credit

Investigators with the United States Department of Agriculture allege Shoemaker secured a $4 million line of credit for Tri-Lakes then deposited $250,000 in a personal account.

That allegation recalls that USDA guaranteed a $27 million loan from UPS Capital for non-profit Physicians and Surgeons Group to purchase Tri-Lakes. The guaranteed loan put the hospital in private hands in November 2005.

The federal indictment states that Shoemaker, the following month, contacted GE Capital and asked for the line of credit.

USDA protested the line of credit, arguing that if Tri-Lakes defaulted on the loans, funds would be applied to GE Capital instead of UPS Capital, which USDA had guaranteed.

When USDA denied the line of credit to Physicians and Surgeons, Shoemaker wrote USDA that the “future of the hospital is in jeopardy.”

USDA reversed its decision on March 28, 2006. The indictment alleges Physicians and Surgeons Group issued a check to Shoemaker’s own company, Kaizen CMR, the next month.

The money was deposited into a bank account at First Delta Credit Union in Marks.

The indictment also describes how Shoemaker allegedly changed Kaizen to non-profit Physicians and Surgeons to apply for the USDA-guaranteed loan to purchase Tri-Lakes. But Shoemaker also converted Kaizen to a separate for-profit company, investigators said.  

Shoemaker faces one count for allegedly making false statements to USDA and a separate count for allegedly embezzling the $250,000 from Tri-Lakes.  

Count ten: Humphreys County hospital

The indictment also alleges Shoemaker diverted monies from the Humphreys County Memorial Hospital for other for-profit companies he oversaw.

Shoemaker took over operations of that hospital in 2007 through a company, Rural Health Developers. Federal investigators say Rural received approximately $1.7 million in “management fees” from the hospital before he purchased it through the company.

The Humphreys County hospital, under Shoemaker, also paid approximately $475,000 to an assisted living facility and to a real estate company, both located in Plantersville — “approximately 160 miles away from Humphreys County Hospital,” according to the indictment.

Federal investigators also allege that Shoemaker diverted approximately $40,000 from Humphreys County Hospital to remodel a mobile home in Ackerman, located in Choctaw County — “approximately 100 miles away from Humphreys County Hospital,” the indictment reads.  

Shoemaker, through Rural Health Developers, used the refurbished trailer to start an outpatient psychiatric program for Choctaw County Medical Center, according to the indictment.

Shoemaker had also established a management agreement in Choctaw County, where the medical center paid him approximately $491,000 in fees, according to the indictment.