Corizon Health Bankruptcy Settlement Grows, But Only by $21 Million
Under the terms of a settlement announced in the bankruptcy of former prison medical contractor Corizon Health on July 17, 2024, the firm’s creditors will receive almost 39% more than the amount they originally negotiated. However, that brings the total settlement to just $75 million, far too little to satisfy hundreds of creditors—including several hundred prisoners and their estates owed settlement payouts from medical negligence and wrongful death suits.
As PLN reported, Corizon Health re-incorporated in Texas as two firms in 2023, keeping $200 million in contracts for prison and jail medical care in one company called YesCare. At the same time, nearly $1.2 billion in liabilities—including unpaid prisoner lawsuit payouts—got dumped into another firm called Tehum Care Services. The latter then filed for bankruptcy to avoid paying what was owed, completing a shady-yet-legal maneuver known as the “Texas Two Step.” [See: PLN, Aug. 2023, p.35.]
The original settlement would have paid creditors just $54 million, including $8.5 million to resolve prisoner claims for an average of just $5,000 each. But that deal fell apart in April 2024, when Judge Christopher M. Lopez of the U.S. Bankruptcy Court for the Southern District of Texas chastised lawyers at both tables for not knowing whether affected prisoners were “even aware that there is a settlement,” as PLN also reported. [See: PLN, June 2024, p.14.]
Judge Lopez was no doubt sensitive to heightened scrutiny given the case since the October 2023 revelation that the parties’ mediator, Judge David Jones, was romantically involved with YesCare attorney Liz Freeman. As PLN reported as well, that prompted clients of Freeman’s former firm, Jackson Walker LLP, to demand millions of dollars in refunds of fees they paid in other bankruptcy cases that Judge Jones oversaw. [See: PLN, Jan. 2024, p.29.]
In April 2024, the same month that Judge Lopez threw out the first settlement plan, the U.S. Trustee approved formation of the Official Committee of Tort Claimants to represent the parties that had sued Corizon, including prisoners and their estates. Attorney Eric Goodman was appointed to represent those claimants. After the new settlement was reached, the Committee filed a joint motion with Tehum in October 2024, asking the Court to adopt procedures necessary to effect the settlement. See: In re Tehum Care Svcs., USBC (S.D. Tex.), Case No. 23-90086.
If approved, Corizon’s bankruptcy will deny or severely reduce compensation to many prisoners who were injured or died due to its failure to provide adequate medical treatment—at least those who already won a verdict or reached a settlement. Under court rules, all pending litigation against Corizon was put on hold once it sought bankruptcy protection. In addition to prisoners, the list of creditors also includes hospitals that provided them medical services which were not paid for or reimbursed by Corizon.
As noted by prisoner advocates in a proposed amici curiae brief, success for Corizon in this case will leave successor YesCare “no incentive to provide adequate care to thousands of incarcerated people nationwide.” Worse, letting the company deploy the “Texas two-step” on prisoners will provide a “roadmap” for other prison profiteers “to exploit some of the most vulnerable populations in the country without consequence.”
Additional source: Business Wire, Reuters News
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