Federal investigation into Steward Health Care over possible foreign corruption

A Justice Department spokesman declined to comment, and a spokesman for Massachusetts U.S. Attorney Joshua S. Levy did not respond to a request for comment. CBS News first reported on the investigation on Thursday, citing sources.

Steward’s international operations have already come under scrutiny, particularly in Malta, where the company first tried to spread its brand abroad. The Globe reported in June that Steward executives Ralph de la Torre, founder and chief executive, and Armin Ernst, head of international operations, were accused of participating in a bribery scheme related to a controversial deal to take over some Maltese hospitals. Maltese authorities alleged that when the deal fell through, both men were part of a criminal conspiracy to siphon millions of dollars from their government for “consulting fees” rather than improving the health facilities they took over.

The U.S. federal government was involved in parts of the Maltese investigation into the failed public-private partnership, according to documents filed in a Maltese court. In the fall of 2022, Maltese investigators handed over the electronic devices of former Maltese Prime Minister Joseph Muscat to a special agent in the Department of Homeland Security’s Criminal Investigation Division and requested assistance in unlocking the devices.

The Maltese investigation culminated in June in a 1,200-page report recommending that Ernst and de la Torre be charged with money laundering, criminal association and corruption of public officials, including Muscat.

It remains unclear whether Ernst, who lives in Brookline, or de la Torre, who moved to Dallas in 2018 along with Steward’s headquarters, will face charges in Malta. Under Maltese law, defendants cannot be tried in absentia, but the United States has an extradition treaty with the island nation.

To obtain an extradition, Maltese authorities would have to provide the Ministry of Justice with evidence compelling enough to issue an arrest warrant. In the report, Maltese investigators also recommended “informing the appropriate authorities in the United States, with particular reference to their Foreign Corrupt Practices Act (FCPA).”

In the U.S., Steward is under scrutiny from federal lawmakers because of its long-running financial problems, including service cuts, shortages of key supplies and unpaid bills to many suppliers. Steward was founded in Massachusetts in 2010 and filed for bankruptcy in May. Bids to buy its eight Massachusetts hospitals are due Monday in a court-supervised auction process.

FCPA investigations can take several years to resolve, experts say, citing the complicated process of proving bribery allegations abroad. Federal prosecutors also tend to look broadly at a company’s activities once an investigation begins, meaning an FCPA investigation can ultimately involve actions in multiple countries.

“Once the Justice Department or the Securities and Exchange Commission understand what happened in Malta, they will ask the question, where else,” said Mike Koehler, a former FCPA lawyer who has taught and written widely on corruption law. “Four years is the average time period, and five to seven years is not uncommon.”

Separately, a businessman who sold the Maltese hospitals to Steward filed a whistleblower complaint with the U.S. Securities and Exchange Commission last year, alleging that the company’s conduct in Malta was a violation of corruption law. The SEC can investigate companies under the Foreign Business Practices Act and impose civil penalties.

David Schumacher, a lawyer and former federal prosecutor who investigated health care fraud cases, called it “extraordinary” that federal investigators conducted “so many separate investigations into a single company in such a short period of time.”

“In my view, this is just the latest example of a series of atrocities in steward history,” Schumacher said in an interview.

The latest investigation, he said, should not further affect Steward’s planned auctions for its hospitals. “This should be an independent process, at arm’s length,” he said.

Steward, of Dallas, has been under the watchful eye of federal investigators for months. In December, federal officials alleged that Steward’s St. Elizabeth’s Medical Center in Brighton filed false claims with Medicare. Steward said Thursday that the case against Medicare had been “administratively closed.”

In a bankruptcy hearing in June, Steward’s lawyers also confirmed that the federal government was investigating Optum’s planned takeover of the Stewardship Health physician group for antitrust violations. Optum has since backed out of the deal.

And in 2022, Steward agreed to pay $4.7 million following another Justice Department investigation into alleged violations of federal law.

Despite the company’s financial difficulties, Steward Health Care’s management approved and spent millions on private intelligence firms tasked with monitoring and digging up incriminating material on the company’s critics, according to a recent investigation by the Globe Spotlight team.

The operations included videotaping a financial analyst at his home and tracking his daughter’s route to school, according to emails, encrypted messages and financial records compiled by global journalism portal Organized Crime and Corruption Reporting Project and provided to the Globe Spotlight team. Another time, salacious details were plucked from the phone of a Steward executive. During the same period, Steward failed to pay vendors who often provided the hospitals with vital supplies and staff, the records show.

Federal MPs, who had already spoken out openly about Steward’s financial problems, have now sharply criticized the company over allegations of fraud abroad.

“Steward, led by Dr. Ralph de la Torre, is just the latest example of how corporate greed is putting our health care system at risk,” Senator Ed Markey said in an emailed statement Thursday. “Whether in Massachusetts or Malta, Dr. de la Torre has used his credentials as a physician and CEO to sell Steward as the savior of health care. Instead, he and his backers in the private equity and real estate industries have gutted the health care system and lined their pockets in the process.”

The investigations add complexity to the company’s situation as it struggles to raise cash and find new operators domestically.

The company recently pushed back the bid deadline for its Massachusetts hospitals by three weeks to mid-July. Optum, a potential buyer of its physician group, also recently backed out of the deal.

The exodus of patients from Steward has also overwhelmed other emergency rooms in eastern Massachusetts, prompting the state to require its health insurers to cover treatment at urgent care centers through the end of September — even if the facility is outside their service network.

Jessica Bartlett can be reached at [email protected]. Follow her @ByJessBartlettElizabeth Koh can be reached at [email protected]. Follow her @elizabethrkohYou can reach Hanna Krueger at [email protected]. Follow her @hannaskrueger.