Media Release

For Immediate Release Contact Phone
April 5, 2007 Phyllis Salowe-Kaye 973-643-8800 ext. 14

Court Decision Allows Citizen Lawsuit against Loans to Private Hospital Management Firm by Bergen County to Proceed

Legal Challenges to loans of $33 million given by Bergen County and the Bergen County Improvement Authority (BCIA) to the for-profit company Solomon Health Group managing of Bergen Regional Medical Center can move forward, said a 3-Judge Appellate Court Panel, in a decision dated April 9, 2007

New Jersey Citizen Action and three Bergen County residents filed suit on August 31, 2005, against Bergen County and the BCIA, claiming that $33 million in loans made to Solomon Health Group were unconstitutional, since the County did not limit the use of the funds to hospital operations, and that the loans had been used by Solomon for its own purposes.

Under the NJ Constitution, public funds cannot be given or loaned to private individuals or companies, unless they are performing a public function. The plaintiffs in the case argued that no restrictions were placed on the loans, thereby violating the Constitution.

"Today's decision reaffirms our claim that the loans were unconstitutional since the County did not limit the use of the funds for carrying out the purposes of Bergen Regional Medical Center and its mission of health care," said Leon Savetsky, attorney for the plaintiffs. "Attorneys for the defendant conceded that the funds loaned to them were being invested outside of NJ. The court finally also noted that the $108 million in fees given annually to Solomon Health Group could also be challenged as 'excessive' and therefore an 'inappropriate gift'.

Two loans were given to Solomon Health Group back in 1998, when it leased the hospital from the BCIA.

  1. A $6 million Working Capital Loan requiring no repayment of principal and interest-free until March 14, 2006. Thereafter, the interest is 50% of the 'increase in the consumer price index'.
  2. An Accounts Receivable Loan, approximately $27 million, which could be used by Solomon 'in its sole discretion for or with respect to the provision of management services at BRMC'. This loan has no interest until March 14, 2016, and thereafter is calculated in the same way as the working capital loan. No principal payments are due on this loan until 2020, three years after the expiration of the lease.

"This court decision gives the residents of Bergen County an opportunity to reclaim millions of their tax dollars that were spent without any benefit to our communities," said Phyllis Salowe Kaye, Executive Director of New Jersey Citizen Action, the state's largest citizen's group with more than 100,000 members. "Diverting millions of funds meant for health care to private use should never have been allowed – and we call on Bergen County to join us in seeking to reclaim these funds, and to fix what went wrong in this sweetheart deal with Solomon Health Group."

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New Jersey Citizen Action is the state's largest citizen watchdog coalition, representing more than 60,000 family members and over 110 affiliated groups.
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