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Wheeling City leaders aware of $30 million lawsuit against Alecto

By CASEY JUNKINS

For the Times Leader

WHEELING — City leaders said a $30 million lawsuit Alecto Healthcare Services faces related to the firm’s operation of a hospital near Los Angeles from November 2015 to December 2016 should not overly concern Wheeling taxpayers or Ohio Valley Medical Center patients.

“Any time that a company you’re doing business with is sued, it is a concern. But it is also not unusual for any company the size of Alecto to be involved in litigation,” Wheeling Mayor Glenn Elliott said.

“I’m aware of this particular lawsuit and it has nothing to do with the city of Wheeling, OVMC or any employees or patients of OVMC,” Vice Mayor Chad Thalman added.

This week, Elliott, Thalman and fellow City Council members voted 7-0 to tax OVMC at 17 cents for $100 of gross income. Later this year, city officials want to declare a tax increment financing district for the area around OVMC, with the plan being to access about $5 million from the TIF. Tentatively, about $3 million of this would go toward structural improvements at the Center Wheeling parking garage and for demolishing the former nurses’ residence at the hospital.

“We had two main choices: Pursue a TIF district with Alecto, or not. Doing nothing would have, in my opinion, killed the transaction and left the 1,000-plus jobs at OVMC in jeopardy,” Elliott said.

Alecto currently faces a $30 million lawsuit in its home state for alleged “egregious malfeasance and/or outright fraud” related to its management of Antelope Valley Hospital, which is located in Los Angeles County, California.

A hospital spokeswoman, Teddi Grant, confirmed the Antelope Valley facility sued Alecto, but said the matter is still pending and declined to provide more information.

According to published reports, Antelope Valley claims Alecto instituted staff cuts, while mismanaging equipment, to cut costs. The lawsuit alleges negligence, fraud, breach of contract and breach of fiduciary duty, reports state.

In a prepared statement, Alecto attorney Mike Garrison called the California lawsuit “baseless,” while adding Alecto will file a countersuit against the Antelope Valley Healthcare District, which Alecto managed from November 2015 to December 2016.

“Alecto immediately improved Antelope Valley Healthcare District’s operations and, despite interference by certain board members and other vested interests, was successful in overcoming the challenges faced by AVHD,” Garrison stated. “Alecto fully performed its obligations under the Management Services Agreement, provided excellent management and left AVHD in a much better position than it was when Alecto arrived at AVHD.”

Elliott and Thalman said although they do not believe the California action should have any impact on Alecto’s work in Wheeling, they will make sure city taxpayers are protected from any potential liability if Alecto relinquishes OVMC at some point.

“While details are still being finalized, it’s important also to keep in mind that under West Virginia law, the risk of default on TIF bonds rests with the bondholders — not with the sponsoring city,” Elliott said.

In May, city council approved a memorandum of understanding with Alecto that states the city will create a new TIF district that includes OVMC and the Center Wheeling garage. TIF allows governments to perform improvements to a property by accessing the money that will result from the property’s increase in value.

Once the TIF is declared, the city plans to access about $5 million from it, with approximately $3 million to be spent in Center Wheeling. The remaining $2 million would be available for spending at the city’s discretion within the TIF district.

Plans tentatively call for the city to transfer ownership of the garage to the Ohio Valley Area Development Corp., which is a nonprofit entity the city uses to facilitate property deals. The OVADC will then lease the 830-space garage to Alecto for $1 per year, while Alecto will have the right to establish parking rates for the structure.

Officials have said the city’s fire department will continue to use the Market Street side of the garage for its headquarters.

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