No good deed goes unpunished

So in July off goes Dr. X to Europe.

Before he leaves and before I had resigned my contract with him, I had provided for him additional doctors to see his patients during his absence, hired a new bookkeeper for him, as well as arranged all of his automatic bank payments, including the payments he had agreed to pay to me for the loan (which was in default) I had made to him and for the balance owed by him to me for products he purchased through my buying group for his practice. 

However during his absence he ordered his bank to stop all the auto payments to me and then on his return begins to tell everyone that I had written checks and withdrawn funds from his account without his knowledge or approval.  So much for truth and honoring ones financial agreements.  Funny thing is that when he was later confronted about these statements at my attorney's office he admitted that he had authorized me to set-up these automatic payments but that he stopped the payments because he knew there wasn't enough money to cover the checks.  I guess that was true because he pulled $20,000 out of his business checking account for his personal use during the month while he was in Europe. How do I know this, his girlfriend and bookkeeper told me.  Obliviously he was more concerned with his month long vacation than for paying his bills.

Unfortunately he hasn't done this just to me. I know of another three vendors to whom he still owes around $20,000 each.  Unfortunately they have not gone after him legally.

Morals vs Business

Just a link to an article or comments made on BYU's management linkedin site.  http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers=&gid=70114&discussionID=8001566&goback=.anh_70114

Religion provides a moral compass and pretty much has always guided my decision making.  It is in fact why I am in the situation I now find myself in.  That is I believe the Golden Rule - "Do unto others as you would have them do unto you."

So after having eliminated my business relationship with Dr. X, I simply boxed up everything for him and; sent int over to his office, including several dozen signed blank checks that I was to use to pay bills while he was in Europe.  I even had all of his accounting up to date and dropped off an electronic copy for his bookkeeper.

On looking back it was the wrong business choice but I believe it was the right choice if you want to keep your principles.  The Machiavelli choice would have been to withhold everything, not resign (because I had full access to all of his banking) and just write checks to pay off the debt owed to me while he was gone.  I couldn't do that.  If for no other reason than to protect his employees who would have been greatly injured financially.

In my next blog the results of my decision.

It's nearly Christmas

I couldn't write because I have had to work really hard at feeling in the Christmas Spirit.  Merry Christmas to all. May God bless us - everyone, including dear Dr. X

The Beginning of the End

Mid-2007 saw the beginning of the real estate collapse. X needed to pay off the IRS because his tax debt had finally caught up with him. He wanted to borrow $50,000 from me to work out the finances with the bank to refinance a piece of property so that he could use the funds to pay the IRS. Luckily I secured the loan with stocks. Unfortunately they were bank stocks.

I made the loan in July after I had a promissory note from X (due in Nov. of 2007 with interest) and possession of X’s bank stocks. Unfortunately, by the end of 2007, only $20,000 had been repaid. Since the loan was in default I asked when the remaining would be repaid and was told that he would pay it back soon. However, instead of paying me back, in January 2008 he bought an interest in a health magazine, for $25,000. That was it; I decided that I had to totally separate myself from him financially.

In February 2008 I sat with X and discussed the situation and told him that I was going to begin the financial separation of our agreements and that all of his accounts with my company were going to be terminated and that he would have to open his own vendor accounts. I even agree to help with the leg work and also had my assistance do all of the paperwork with each of the vendors to open X’s credit lines. That was a very long process.

At this point he owed me over $140,000. So I decided to sell the other business I had opened and apply 50% of the profit against his outstanding debt. That I did and reduced his outstanding payables but it still wasn’t enough.

I went even further to help him by developing a very detailed plan for eliminating his entire debt in over a one year period. He agreed to it and told me to put it in place.

By June 2008 I had sold my business to another doctor and applied 50% of the profits to X’s outstanding debts to my company.

At this point I was no longer leasing employees to him and was only handling his accounting and payables.

At the end of June X was about to leave on another month long trip to Europe. I received word that he was on hold with a number of his vendors and he was telling his employees that it was my fault. So I let him know that I wasn’t going to put up with him lying about me and that I was ending the entire relationship. Have fun in Europe.

Next blog – the aftermath and what I should have done.

2003 to 2006

I will try to make this quick.  The doctor (let's start calling him X) after seeing what I did for his business thought I could do the same for other doctors wanting to opening their practices and as a benefit, we would ask them to refer over to X for specific procedures. This is called co-management in the health care business.  So I put together a whole co-management program for doctors in the area.

But the real kicker was that we decided to create a separate corporation to provide a whole group of services to these other doctors, and X and I would split the profits.  There were two big problems that came about from this arrangement, and something I did not foresee.  First, this didn't end up being a 50/50 effort on X's part, as I did all the work.  Secondly, following our attorney's suggestion we provided a variety of services but I took it a step farther and formed an internal buying group for purchasing supplies for the doctors.  I arranged all of the contracts and placed them under the corporation we had formed but I also personally loaned the corporation the hard cash to fund the buying group purchases.

Finally, under my own separate corporation I funded the opening of an additional practice and contracted with X to put his name on it.  I hired doctors and staff to work there and they were all paid out of my corporation. 

After about three years I had 33 employees and 8 doctors under contract.  I was working night and day. Unfortunately the doctors were over reaching on their credit through my buying group on which I was making no profit and I was getting no support from doctor X. All of the credit for the corporation was being shouldered with my personal credit.

So I woke up near the end of 2006 and turned to my wife and said "I am tired of being the doctors bank and I am going to kill the buying group."  I let all of the offices know that they had 60 days to arrange their own contracts with the suppliers.  However, I keep doctor X on and one other doctor. I wish I hadn't.

About this same time the state board began asking questions of a couple of my doctors about the arrangement they had with our corporation and whether X was involved.  That is when I found out from X that CA state law actually prohibited him from being in this type of business because it would be seen as control over another practice.  He and the other doctors were sweating bullets. So they all started telling the board that they had no connection with X in their business.  In other words, they lied.  I on the other hand did not have such a restriction and was told by my attorney that the board could do nothing because I was not governed by the board.

Doctor X resigned from the corporation and released all of his interest in it.  He was glad to get out of it and this is when things began to get really interesting.  At least I now had complete ownership of the corporation, and why not, I shouldered all of the financial risk.

Getting it under control

By the end for 2001 the doctor asked me to take over management of his operation. I let him own that I would do it but not as an employee, but as a company offering a fee for service.  At this point I was making major operational changes in every aspect of the office except for medical issues. The office wasn't fully computerized & the office was running all of its appointments on an appointments book.

Account was brought into the modern age by a huge amount of hours and late nights to get a handle on the businesses financials. The doctor's wife actually thanked me because the doctor was now getting some sleep since he didn't have to spend every night trying to figure out his bills. (no kidding)

I also had taken over payroll.  That was how I found out he wasn't paying his Workman's comp insurance and that he had outstanding state taxes on the business too.  Getting him reinstated with State Fund was not fun.



Needless to say, I spent 2002 getting these areas straighten out, however, 2003 is when the real trap begins.  See you tomorrow.

Happy birthday Scott

Just as a side note my son Scott is 25 today. Scott have a great day & enjoy your time at Disney World.
Happy birthday little boy. Here is his blog site - http://skoticus.blogspot.com.  I think you find it entertaining.