Lawsuit looming over 114 vehicles
by Kellen Moore
An attorney for Smoky Mountain Center has threatened legal action if the New River Service Authority board does not turn over custody of dozens of vehicles by midnight tonight.
The two parties have been deadlocked for more than a month, wrangling over questions of ownership while new provider Daymark Recovery Services warns that it will have to cut mental health services to purchase cars if it does not receive some of the 114 vehicles soon.
Smoky Mountain Center, the local management entity, claims that the vehicles should revert back to it following the closure of New River Behavioral HealthCare due to contractual agreements, N.C. Administrative Code and precedent set across the state.
But the New River Service Authority board maintains that the vehicles are titled to New River and may be sold by the board to pay the failed organization's debts.
Commissioner Nathan Miller, Watauga County's representative on the NRSA board, didn't hide his displeasure Monday at the possibility of litigation from Smoky Mountain Center.
“I think that is a great colossal waste of taxpayer dollars,” Miller said.
Discussion of the vehicles has been a part of the NRSA board's work for more than a month.
At the Nov. 3 meeting, the board agreed to lease New River vehicles to Daymark for $1 for up to three months, with the condition that Daymark pay for all insurance and maintenance.
Then, at the Nov. 18 meeting, the board decided to instead auction all the vehicles through the government surplus website http://govdeals.com .
At the Nov. 29 meeting, the board decided to halt the proposed sale or lease of vehicles to Daymark and examine the issue again at its Dec. 13 meeting.
On Friday, attorney J.K. Coward Jr. issued an ultimatum on behalf of Smoky Mountain Center in a letter to Bruce Kaplan, attorney for the New River Service Authority board.
“I regret that New River has decided upon the course you outline,” Coward wrote. “The provider will now have to begin the process of terminating services to the citizens of the New River counties. … The cars are not needed for provider employees to ride around going to luncheon meetings. The cars are needed to transport patients to places where they receive treatment, counseling and other services.”Coward stated that he was offering his offices through the weekend and until today to “avoid the inevitable legal course of action the LME must now consider.”
Coward's letter demanded that New River relinquish custody of the vehicles and titles on or before midnight tonight.
He also suggested that the board call a special meeting to discuss the matter. The board has not called such a meeting and has indicated that it will save discussions for its next meeting.
Smoky Mountain Center CEO Brian Ingraham explained his organization's position in an interview Friday.The current contract between Smoky Mountain Center and New River Behavioral HealthCare stipulates that if the contract includes payment for equipment purchased with non unit-cost reimbursement that those assets rest with the LME as long as the provider continues to offer services.
Unit cost reimbursement refers to a payment earned when the provider provides a unit of services.If the services are discontinued, the contract states, disposition of the assets shall occur as approved by the N.C. Division of Mental Health, Developmental Disabilities and Substance Abuse Services and in accordance with North Carolina law.
“This, again, is a very straightforward situation in terms of the contractual responsibilities,” Ingraham said.
The N.C. Administrative Code states in two sections that equipment costing $5,000 or more purchased with division funds may be transferred to other division-funded services if no longer needed by the original service.
Brad Deen, a spokesman for the division, said Monday that he was aware of the debate and was working to get a definitive answer. He did not have that answer by press time Tuesday.
This isn't the first time the question has arisen in North Carolina.
In similar situations throughout the state, vehicles and equipment reverted to the LME when a service provider stopped providing services, Ingraham said.
Daymark CEO Billy West stated that New River itself had participated in that process before when it stopped providing services in Surry, Yadkin and Iredell counties.
“It is fact that when New River ceased operations in the three central region counties of Smoky Mountain that the vehicles New River used were transferred from New River to a new provider, not Daymark,” West wrote in a letter to the NRSA board Friday. “This being said, I am not sure what has changed between now and when New River vacated the central region area.”Miller said the central region situation was different.
When New River Behavioral HealthCare moved into Surry, Yadkin and Iredell counties, that local management entity, Crossroads Behavioral Healthcare, provided startup money, part of which went to vehicles, he said.
Crossroads has provided documentation and receipts for those startup costs, so they may have a claim to the vehicles or the startup money, Miller said.
“When you start demanding assets, you need to show a little proof,” he said.
In Smoky Mountain Center's counties, the vehicles were not purchased with startup money, Miller said. The money SMC gave New River was earned by the organization by providing services, he said.
Furthermore, some of the vehicles were purchased prior to 2007, when the five counties entered into the 160A agreement that formed the New River Service Authority.
“I don't know how Smoky can lay claim to them,” he said.
Kaplan declined to elaborate further on the board's stance due to the threat of litigation, but he did say that the board and financial consulting firm Martin Starnes & Associates were reviewing the matter.
He added that the 114 vehicles had been purchased over a nearly 10-year period, so not all would have been funded the same way.
In the meantime, Daymark is making do without the vehicles it needs.
West agreed with Smoky Mountain Center in his letter to the board Friday.
“Upon further due diligence I cannot purchase the vehicles or lease the vehicles because it is even more clear ownership does not belong to New River,” West wrote, outlining several reasons for his thought.
West stated that if the vehicle transfer process had not started by Monday that he would assume Daymark would not receive them.
“At this point, I don't care,” West said in an interview Tuesday. “We've got no intention of suing. I'm not going to spend any more time, money or effort on this thing.”
The two parties have been deadlocked for more than a month, wrangling over questions of ownership while new provider Daymark Recovery Services warns that it will have to cut mental health services to purchase cars if it does not receive some of the 114 vehicles soon.
Smoky Mountain Center, the local management entity, claims that the vehicles should revert back to it following the closure of New River Behavioral HealthCare due to contractual agreements, N.C. Administrative Code and precedent set across the state.
But the New River Service Authority board maintains that the vehicles are titled to New River and may be sold by the board to pay the failed organization's debts.
Commissioner Nathan Miller, Watauga County's representative on the NRSA board, didn't hide his displeasure Monday at the possibility of litigation from Smoky Mountain Center.
“I think that is a great colossal waste of taxpayer dollars,” Miller said.
Discussion of the vehicles has been a part of the NRSA board's work for more than a month.
At the Nov. 3 meeting, the board agreed to lease New River vehicles to Daymark for $1 for up to three months, with the condition that Daymark pay for all insurance and maintenance.
Then, at the Nov. 18 meeting, the board decided to instead auction all the vehicles through the government surplus website http://govdeals.com .
At the Nov. 29 meeting, the board decided to halt the proposed sale or lease of vehicles to Daymark and examine the issue again at its Dec. 13 meeting.
On Friday, attorney J.K. Coward Jr. issued an ultimatum on behalf of Smoky Mountain Center in a letter to Bruce Kaplan, attorney for the New River Service Authority board.
“I regret that New River has decided upon the course you outline,” Coward wrote. “The provider will now have to begin the process of terminating services to the citizens of the New River counties. … The cars are not needed for provider employees to ride around going to luncheon meetings. The cars are needed to transport patients to places where they receive treatment, counseling and other services.”Coward stated that he was offering his offices through the weekend and until today to “avoid the inevitable legal course of action the LME must now consider.”
Coward's letter demanded that New River relinquish custody of the vehicles and titles on or before midnight tonight.
He also suggested that the board call a special meeting to discuss the matter. The board has not called such a meeting and has indicated that it will save discussions for its next meeting.
Smoky Mountain Center CEO Brian Ingraham explained his organization's position in an interview Friday.The current contract between Smoky Mountain Center and New River Behavioral HealthCare stipulates that if the contract includes payment for equipment purchased with non unit-cost reimbursement that those assets rest with the LME as long as the provider continues to offer services.
Unit cost reimbursement refers to a payment earned when the provider provides a unit of services.If the services are discontinued, the contract states, disposition of the assets shall occur as approved by the N.C. Division of Mental Health, Developmental Disabilities and Substance Abuse Services and in accordance with North Carolina law.
“This, again, is a very straightforward situation in terms of the contractual responsibilities,” Ingraham said.
The N.C. Administrative Code states in two sections that equipment costing $5,000 or more purchased with division funds may be transferred to other division-funded services if no longer needed by the original service.
Brad Deen, a spokesman for the division, said Monday that he was aware of the debate and was working to get a definitive answer. He did not have that answer by press time Tuesday.
This isn't the first time the question has arisen in North Carolina.
In similar situations throughout the state, vehicles and equipment reverted to the LME when a service provider stopped providing services, Ingraham said.
Daymark CEO Billy West stated that New River itself had participated in that process before when it stopped providing services in Surry, Yadkin and Iredell counties.
“It is fact that when New River ceased operations in the three central region counties of Smoky Mountain that the vehicles New River used were transferred from New River to a new provider, not Daymark,” West wrote in a letter to the NRSA board Friday. “This being said, I am not sure what has changed between now and when New River vacated the central region area.”Miller said the central region situation was different.
When New River Behavioral HealthCare moved into Surry, Yadkin and Iredell counties, that local management entity, Crossroads Behavioral Healthcare, provided startup money, part of which went to vehicles, he said.
Crossroads has provided documentation and receipts for those startup costs, so they may have a claim to the vehicles or the startup money, Miller said.
“When you start demanding assets, you need to show a little proof,” he said.
In Smoky Mountain Center's counties, the vehicles were not purchased with startup money, Miller said. The money SMC gave New River was earned by the organization by providing services, he said.
Furthermore, some of the vehicles were purchased prior to 2007, when the five counties entered into the 160A agreement that formed the New River Service Authority.
“I don't know how Smoky can lay claim to them,” he said.
Kaplan declined to elaborate further on the board's stance due to the threat of litigation, but he did say that the board and financial consulting firm Martin Starnes & Associates were reviewing the matter.
He added that the 114 vehicles had been purchased over a nearly 10-year period, so not all would have been funded the same way.
In the meantime, Daymark is making do without the vehicles it needs.
West agreed with Smoky Mountain Center in his letter to the board Friday.
“Upon further due diligence I cannot purchase the vehicles or lease the vehicles because it is even more clear ownership does not belong to New River,” West wrote, outlining several reasons for his thought.
West stated that if the vehicle transfer process had not started by Monday that he would assume Daymark would not receive them.
“At this point, I don't care,” West said in an interview Tuesday. “We've got no intention of suing. I'm not going to spend any more time, money or effort on this thing.”