Ray Shoemaker 9-28-12

Published 12:00 am Friday, September 28, 2012

Feds say ‘giver’ Shoemaker took a lot, too

By Billy Davis

The Memphis Business Journal, in a glowing story in 2006, called him the “Turnaround King,” describing how Ray Shoemaker saved a troubled Batesville hospital called Tri-Lakes Medical Center.

In the story, Shoemaker was credited for improving cash flow at Tri-Lakes to the tune of $3 million in profits that year, and creating 450 jobs.

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“Shoemaker knows that he is a hot commodity,” the Journal story explained, but the Tupelo resident was committed to staying in Batesville, his adopted home.   

That same year, Modern Healthcare magazine named Shoemaker an “Up and Comer” in the healthcare industry.

In 2007, a year later, news broke that Tri-Lakes was declaring bankruptcy and reorganizing under Chapter 11 two years after it went from public to private hands.

This past February, a federal jury in Oxford found that Shoemaker, also in 2006, misled the United States Department of Agriculture  — “made a material misstatement” — according to his federal indictment.

When the USDA balked at approving a $4 million line of credit for Tri-Lakes, Shoemaker wrote to the agency and claimed the future of the hospital was in jeopardy unless the funds were approved.

The government agency eventually reversed its decision and on April 7, 2006, Shoemaker ordered a check written for $250,000 from the line of credit to his consulting company, Kaizen.

Shoemaker’s decision to transfer the hospital funds to his own company, when loan papers prohibited it, was Count Nine in the indictment against the “Turnaround King.”

All together, Shoemaker was convicted on four counts of taking what wasn’t his to take.

‘He’s a giver’  

“I don’t believe in this Jekyll and Hyde story,” said Tupelo pastor Jeffery Daniel, who pastors White Hill Missionary Baptist Church where Shoemaker attends with his family.

Daniel said he sat through portions of the federal trial, then attended Shoemaker’s sentencing hearing that was held Monday in Oxford. The trial failed to prove Shoemaker’s guilt, said the pastor.

“I’m definitely not pleased with what went down,” Daniel said of the trial and sentencing. “I feel like Ray got a raw deal.”

Shoemaker entered a not guilty plea when he was indicted, and he indicated a court fight was coming when he hired well-known defense attorney Steve Farese to represent him at trial.

At the sentencing Monday, Shoemaker told U.S. District Court Judge Neal Biggers he had aspired to be in politics, to improve healthcare, and to be a good husband.

“I have failed at all three,” he said, sobbing as he talked.  

According to Daniel, Shoemaker’s words to the federal judge amounted to a more general statement about the investigation and indictment, rather than an admittance of guilt.

The pastor described how Shoemaker helped fellow members of White Hill who needed financial help; how he paid for his son’s basketball team to attend a Memphis Grizzlies game; and how he held Super Bowl parties at his home with other men from the church, in order to serve as a role model for them.

“He wanted them to be in a good environment without drinking and foolishness,” Daniel said. “He knew there’s a need for role models for men in the black community.”

“He’s a giver,” Daniel said of his church member. “The church members asked what this was all about, because that’s not the Ray we know. We can’t see him taking because he gives.”

Shoemaker and Riverbirch

While Shoemaker was still at Tri-Lakes, he was also inking a deal at Humphreys County Memorial Hospital in Belzoni. At first his management firm, Rural Healthcare Developers, operated the public-owned hospital in 2007, then purchased it in 2008, renaming it Patients’ Choice Medical Center.

Federal investigators found that Rural Healthcare Developers was paid $1.7 million from January 2007 to April 2008 for managing the then-public hospital.

The Belzoni hospital, under Shoemaker, was accused in 2008 of improperly taking nearly $30 million in improper Medicaid payments, The Northeast Mississippi Daily Journal has reported.

Also from 2007 to 2008, Shoemaker allegedly transferred $457,000 from the Humphreys hospital, when it was still public, to an assisted living facility, Riverbirch, located in Plantersville near Tupelo.

Federal prosecutors, for whatever reason, did not charge Shoemaker with transferring $457,000 from the public hospital to a private company. But he was convicted of using $39,922 of those transferred funds to pay Riverbirch for renovating a mobile home in Choctaw County, Miss.

After the mobile home was renovated with Humphreys County funds, Shoemaker used it for outpatient psychiatric services for Choctaw County Medical Center in Ackerman.

Investigators found that Shoemaker was inking a deal in January 2008 with the Choctaw hospital for outpatient services at the same time renovation of the mobile home was under way.

Choctaw County eventually paid Shoemaker $491,000 in fees for overseeing operation of its county hospital and nursing home, investigators learned.

The federal indictment states that the owners of Riverbirch also owned a company called Sara Lou Properties. It’s unclear in the indictment if investigators believe $457,000 went to Riverbirch or Sara Lou.

It’s also unclear in the indictment if the investigation found any wrongdoing at Riverbirch and Sara Lou.
Robert Lemmon, who owns Riverbirch with his wife, did not answer a phone call when a reporter called this week.

“Tell him I’m not here,” Lemmon was overheard telling a receptionist who answered the phone.

A $12,000 bribe

Shoemaker was also convicted of taking $12,000 in bribes from David Chandler, the former county administrator, as part of a kickback and bribery scheme at Tri-Lakes.

Federal investigators alleged the scheme involved Chandler, Shoemaker and businessman Lee Garner, but Judge Biggers tossed Garner’s conviction when he found prosecutors failed to prove Chandler was acting as an agent of the then-public hospital.

Two counts against Shoemaker were also dropped related to the bribery scandal.

Farese motioned for the federal court to acquit Shoemaker on the remaining bribery charge but Biggers denied the motion according to court documents.

‘We did it!’

Shoemaker started at Tri-Lakes at its “west campus,” the former main campus that still serves as a behavioral health clinic.

The Memphis Business Journal story describes how Shoemaker was asked to start the behavioral health clinic.

Former employees of Tri-Lakes, contacted by The Panolian, remembered that Shoemaker was hired as an employee at the clinic over its senior care unit.

At some point Shoemaker moved from the west campus to the main hospital and was already its chief operating officer when the hospital was sold in 2005 to Dr. Robert Corkern. He was overseeing the hospital as CEO when the Journal published its story in November 2006.

“We did it!” Shoemaker exclaimed to hospital employees when the $23 million sale was finalized in late 2005, The Panolian reported at the time.  

A former Tri-Lakes employee said Shoemaker exuded a “charismatic” personality in the halls of the hospital.

“He was easily believable,” said the employee, who asked to remain anonymous.

A second employee said Shoemaker built a “little army” of loyal employees by moving “impressionable” people into positions of authority, with no need to remind them who had helped their advancement.

“He made them feel important,” said the employee. “But we now know that was all just smoke and mirrors.”

Concurrent sentence

Shoemaker was sentenced Monday to 55 months, four years and seven months, in federal prison. The sentence could be shortened if he attends drug counseling while incarcerated.

Judge Biggers, who handed down the sentence, announced that the seven convictions for conspiracy to defraud the U.S. government, stealing from Tri-Lakes, bribery, and lying to the FBI will run concurrently.

The maximum sentence was 55 months on most counts, and Shoemaker’s imprisonment could have run consecutively, adding up to 23 years in a federal prison.  

The federal judge also fined Shoemaker $10,000.

All totaled, Shoemaker and his companies pocketed approximately $2.4 million over two years from Tri-Lakes, Humphreys County and Choctaw County according to the investigation into his finances.

Tri-Lakes today

A spokesman for Tri-Lakes Medical Center said this week the 112-bed hospital remains among the largest employers in the county, with a payroll of $28 million in 2011 for 369 employees.

Approximately $42.2 million has been spent over the last five years to improve the facility and its services.

A syndicate including Batesville physicians bought Tri-Lakes through the bankruptcy court proceedings in 2009. The physician/owners maintained a substantial interest in ownership of the facility following its acquisition by Health Management Associates in 2011.

In a statement the current Tri-Lakes CEO, Wes Sigler, said of the current hospital operation:

We are pleased with the progress that we have made over the past year since Health Management Associates acquired Tri-Lakes.  Our team is working diligently to expand our services and our medical staff, maintain high standards of quality, and improve the outcomes and satisfaction of the patients from all of the communities that we serve.

It is exciting to see what we are accomplishing as we continue to make our hospital great.