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Maimonides executives accused of funneling hospital resources for personal gain in $500 million class-action lawsuit

by John R. Fischer, Senior Reporter | June 09, 2023
Business Affairs
Maimonides Medical Center is facing a $500 million class action lawsuit. (Photo courtesy of Maimonides)
In a $500 million class-action lawsuit, executives and board members at Brooklyn-based Maimonides Medical Center have been accused of squandering hospital resources earmarked for patient care and community health initiatives on personal needs.

The four plaintiffs in the case, Mann et al. v. Gibbs et al., are being represented by Morrison Cohen, and say that the actions of higher-ups have brought the hospital to the brink of declaring bankruptcy.

Among their allegations are that executives diverted the hospital’s financial resources to fund “bloated” salaries for management, establish insider contracts with companies owned by hospital trustees, secure donations to charities affiliated with trustees, and create “decadent marketing strategies” that included purchasing the rights for naming the Brooklyn Cyclones Baseball stadium.

The largest health system in Brooklyn, Maimonides serves over 300,000 patients annually at its three hospitals and 80 community-based practices and outpatient centers, employing 1,800 physicians in total.

The accusations reflect a growing demand for greater budget transparency within healthcare and other industries by executives and management, and how such actions affect the price and quality of services they provide.

“Maimonides is in a great neighborhood serving diverse communities of hardworking Brooklynites. They deserve a great hospital, not a failing one,” said attorney Y. David Scharf in a statement.

According to their suit, the issues started in 2016 following the appointment of Ken Gibbs as CEO. The plaintiffs say Gibbs, a former banker with no relevant prior experience in healthcare management, used hospital resources to triple his salary between 2016 and 2020.

In a 2021 audit by accounting firm PricewaterhouseCoopers, the hospital declared a loss of $145 million and defaulted on some of its debt obligations, bringing it close to declaring bankruptcy.

In a statement to HCB News, Maimonides denied any wrongdoing, saying that the allegations made against it are the “same discredited arguments and malicious personal attacks” made by the Save Maimonides campaign, which has accused the hospital and its staff of neglect and abuse over the last few decades, including being understaffed and overfunded, despite having a billion dollar revenue stream and relying on federal and state grants.

Led by Brooklyn community leaders, the grassroots effort currently has a petition circulating that is demanding an independent oversight commission to look into the allegations against Maimonides Medical Center.

“Those who understand Maimonides and the type of challenges it faces as a safety net institution — physicians, community leaders, elected officials, and our labor partners 1199-SEIU, NYSNA, and CIR — see this campaign for what it is and have all publicly opposed it,” said Maimonides in its statement.

The case was filed in the Supreme Court of the State of New York, Kings County.

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