A possibly thorny subplot to Forum Health’s bankruptcy

A possibly thorny subplot to Forum Health’s bankruptcy

As everyone has seen in the recent General Motors and Chrysler bankruptcies, judges in U.S. Bankruptcy Court have enormous discretion in dealing with issues that pit companies against creditors and even creditors against creditors. The courts raised eyebrows with rulings that were unfavorable to some of the secured creditors, to the advantage of unsecured creditors.

A similarly challenging decision may face Judge Kay Woods of the Northern District of Ohio’s U.S. Bankruptcy Court if Forum Health does not successfully reorganize under Chapter 11 bankruptcy and is forced into Chapter 7.

We continue to hope that Forum will emerge from Chapter 11 as quickly as possible and in a position to continue to provide quality health care to residents of the Mahoning Valley.

But if the creditors continue to push Forum toward liquidation rather than reorganization, the time will come when someone is going to have to speak up to protect a valuable community asset from being used to satisfy the claims of out-of-town creditors.

Some foundation money at risk

We’re referring to millions of dollars in assets belonging to the Western Reserve and Trumbull Memorial foundations, which were used — ill-advisedly, we would say — as collateral for some of Forum’s debts. The decision to pledge those foundation assets as collateral was made long before Walter Pishkur was named Forum president and chief executive officer. Indeed, Pishkur says one of his priorities in the reorganization is to free up those foundation assets.

Pishkur estimates that about $12 million is tied up in the bankruptcy — evenly divided between the Western Reserve Foundation, which traces its roots to the Youngstown Hospital Association, and the Trumbull Memorial Foundation, which was tied to Trumbull Memorial Hospital. The hospital systems merged, but the charitable foundations remained separate. The pledged assets represent about a third of the total wealth of the foundations, we’ve been told.

At some point, it may become necessary for someone to step up as an advocate to protect these foundation assets from loss. Over the years, hundreds of people have contributed to the foundations with the intention of providing health care facilities or services for their neighbors. Perhaps it will be a lawyer with a strong sense of community involvement. Perhaps it will be the Ohio attorney general’s office.

Regardless, it can’t hurt if the creditors who are so eager to short circuit Forum’s reorganization know that at least some of the most liquid assets they’re eyeing won’t be given up without a fight.