CPI: Government of Puerto Rico let debt with HIMA’s owners rack up for almost 50 years

By Jeniffer Wiscovitch Padilla | Center for Investigative Journalism

Although the HIMA hospital system was in a resounding economic decline, which ended in the largest commercial bankruptcy in Puerto Rico, its owners and main directors got compensation of up to half a million dollars, bought luxury goods, bought new companies and properties, and accommodated dozens of family members and politicians in the corporate group.

Some of them continued to earn annual incomes between $300,000 and $500,000 until the bankruptcy filing in September 2023, including the company’s co-founder, Joaquín Rodríguez García, who retired from the operation in 2018, but remained as chairman of the company’s Board of Directors. His children, Armando Rodríguez Benítez, the current president, and vice president of Legal Affairs, Heidi Rodríguez Benítez, also earned such salaries.

Meanwhile, Grupo HIMA stopped paying its doctors, employees, and suppliers, racking up million-dollar debts, particularly with groups of specialist doctors who provided services to their patients under contract, such as oncological surgeons, radiologists and pediatricians, and doctors who ran their intensive care units. Some of them were owed money since 2017 and everything indicates that they will be left unpaid in the bankruptcy process, according to the experts consulted.

Among the medical groups that were left with large debts were Grupo Radio Terapia Turabo, MB Advance Surgery Group, Grupo Intensivo Pediátrico, Neurocritical Care Physician and JVD Advanced Imaging, according to the bankruptcy court docket. This last corporation is owned by Dr. Josué Vázquez Delgado, who is the leader of the new group that acquired the HIMA hospital in Humacao as part of the bankruptcy process.

Dozens of victims of medical malpractice and their relatives with million-dollar sentences in their favor that appear in the judicial file will also be left without benefits. Wilbert López Moreno, professor of Bankruptcy law at the University of Puerto Rico Law School’s Legal Assistance Clinic, explained that these types of debts are the last to be collected in a bankruptcy, if there is money left.

The bankruptcy under Chapter 11 reorganization is around $500 million and Grupo HIMA has generated only $51.3 million from the sale of all its hospitals. According to Humberto García, director of the Boletín de Puerto Rico, this is the largest commercial bankruptcy in the history of Puerto Rico. The Boletín is a publication that compiles information on all bankruptcies on the island during the past three decades.

For more than a decade, what was one of the main hospital conglomerates in Puerto Rico accrued debts with 4,400 creditors, especially with the government, which did little or very little to collect more than $180 million from HIMA and its affiliated corporations. Most of these public funds are about to be lost due to the lack of proactivity of government agencies in collecting debts for years, an investigation by the Center for Investigative Journalism (CPI, in Spanish) revealed. The investigation included about twenty testimonies from people close to the operation, the review of hundreds of judicial documents, and the analysis of experts in tax and bankruptcy matters.

“What has happened with HIMA is that the debt is so large, that the money they’ve been collecting from the sale [of hospitals] is negligible. That hospital is going to end up in a liquidation process,” warned Professor López Moreno. “There’s no way, anywhere, that you can reorganize when you owe around $500 million,” he said.

Armando Rodríguez Benítez, chief executive officer of the Grupo Hospitalario HIMA, has publicly blamed the health insurance plans and the COVID pandemic for the poor financial state of the companies and their bankruptcy filing in August 2023. However, the million-dollar debts accumulated and defaults with banks, government agencies, doctors and suppliers began more than a decade ago.

The founders of the company, banker, former director of the Puerto Rico Lands Administration and former vice president of the Puerto Rico Industrial Development Company (PRIDCO), Joaquín Rodríguez García, and Carlos M. Piñero Crespo, certified public accountant and former member of the Board of Directors of the Corporation for the Economic Development of the Capital City, had gone down a similar path with another hospital company, the San Rafael Hospital in Caguas. This institution went bankrupt in 1988 and owed more than $1 million to the Department of the Treasury of Puerto Rico. Although Rodríguez García and Piñero Crespo announced their retirement in 2018, they said they would remain on the Board of Directors of Grupo HIMA San Pablo, and in 2022 they were still listed as president and vice president of the corporation in the latest report available in the Department of State’s Registry of Corporations.

Five company sources, who spoke separately and on condition of anonymity, witnessed how the Rodríguez family, majority owners of HIMA, maintained their lifestyle while the corporation drowned in debt. This included a taste for good food, luxury vehicles, and vacations by its president and different family members. Likewise, they testified that the family had political connections during the period in which they accrued more than $180 million in debts that went uncollected by the different government administrations in power.

Despite four attempts to interview him to obtain his version of the allegations, Rodríguez Benítez refused to answer questions from the CPI. His press spokesperson, Brendaly Marcano, stated in writing that “on this occasion we won’t be commenting on the matter.” The interview request was extended to Grupo HIMA and its board of directors.

Among HIMA’s defaults are unemployment and disability insurance for employees to the Department of Labor, and withholdings for employees and contractors and Sales and Use Tax (IVU, in Spanish) to the Puerto Rico Treasury Department. The latter could constitute an illegal appropriation that is classified as a serious crime in the Penal Code. CPA David Rodríguez, co-chair of the Tax Affairs Committee of the CPA Society of Puerto Rico, without giving a specific opinion on the HIMA case because he did not have the details of the file, explained that the PR Treasury can impose fines of up to $10,000 per violation, and penalties up to 100% of the debt in the case of IVU. The PR Treasury can also refer these cases for criminal charges against both corporations and the partners, directors, shareholders, and employees responsible for remitting the money to the government.

“This could be considered an illegal appropriation of public funds,” he said about this type of non-payment. The PR Treasury can also seize corporations.

Department of Justice press spokeswoman Joan Hernández told the CPI that she had not been able to identify any referral related to the Grupo HIMA.

Puerto Rico Treasury holds the biggest debt
HIMA owes $36 million to the PR Treasury. At least $8 million of this debt is unsecured, according to data provided by the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF, in Spanish).

López Moreno explained to the CPI that the federal Bankruptcy Code provides for two types of debts: secured and unsecured; and among the uninsured, there are priority ones.

Secured debts are guaranteed by collateral and are the first to be collected, he explained. The unsecured ones are not backed by any type of collateral. Among the latter are priority debts such as salaries, alimony, and taxes. The remaining debts, those that are least likely to be collected are personal loans, credit cards, contractors, damage claims, and suppliers, among others, López Moreno explained.

PR Treasury never embargoed HIMA, according to an internal source, even though seizure is part of the procedure available for debt collection. PR Treasury did not confirm or deny this information.

Citing the confidentiality that assists taxpayers, José F. Chaves, deputy secretary of Legal Affairs, and Ángel Pantoja, deputy secretary of Internal Revenue and Tax Policy of the Treasury Department of Puerto Rico, refused to tell the CPI what collection efforts, if any, the agency made, and if they were embargoed.

“Any debt that is assessed in the system is subject to the collection efforts that the PR Treasury Department is authorized to carry out, from notifications to seizures. Obviously, if they’re in a bankruptcy process, they have protections, but nothing limits [that on] a debt that is appraised in the system, the PR Treasury Department can carry out collection efforts,” Pantoja explained in a general way.

“There are provisions in the Code that allow for [transferring] the responsibility [for payment] to the officers [of a legal entity], in case those provisions apply,” Pantoja added when asked about the PR Treasury’s ability to collect from directors. He specified that it would depend on how the bankruptcy process develops.

HIMA Board knew about the default with PR Treasury since 2017
A financial report, which according to a source was handed to hospital managers in 2017, alerted them that payments were not being made to the PR Treasury Department. However, the default continued until the time of bankruptcy in August 2023, the Bankruptcy Court filing shows.

“The [PR] Treasury Department is extremely negligent. And debts of years and years and years of all taxpayers who withhold and don’t pay are accruing, and that happens in the salary scenario and that also happens in the IVU scenario,” said a source who worked at the PR Treasury.

The CPI source assured that for the PR Treasury Department, when it comes to economically powerful people, “they are subject to different rules.”

“That happens with pharmaceutical companies. That happens with hospitals. This happens with every industry that has many employees and with every industry that generates a lot of money, because they gain a certain power in which, as soon as they have a debt of that magnitude and the informal collection process is done, the first thing you’ll have is a representative [of the company] inside the PR Treasury Department. And meanwhile, someone else is lobbying in Fortaleza (the Governor’s office),” said the certified public accountant who worked in a high-ranking position in the PR Treasury.

He said that in HIMA’s case, “they always had someone on the [Treasury’s] roster.”

The CPI attempted to interview former PR Treasury Secretary Francisco Parés before his resignation from the Department in January, to learn what steps, if any, he took to collect the debt, but he was not available or responded to written questions sent by the CPI. Parés now works for the Metro Pavía hospital group that bought the HIMA hospital in Caguas.

Four CPI sources assured that several former politicians or people linked to politicians had contracts with HIMA, among them former governors Sila M. Calderón and Aníbal Acevedo Vilá; Wilma Pastrana, then wife of former governor Alejandro García Padilla; Margie Rosario Lugo, wife of Senate President José Luis Dalmau; and the convicted former administrator of Youth Institutions, Miguel Rivera Hernández, first cousin of Senator Thomas Rivera Schatz. All of them confirmed to the CPI that they had contracts with the hospital group.

Rivera Schatz’s sister, Silvia Rivera, also works at Sabiamed, the Rodríguez family corporation that manages electronic medical records, the CPI confirmed.

“I had an advisory contract on federal matters before Congress and the agencies of the Executive Branch of the federal government,” said Acevedo Vilá in written statements. The contract was from 2010 to 2022, he confirmed. He was governor from 2005 to 2009.

Meanwhile, Calderón told the CPI that she had a contract with HIMA more than a decade ago with her company IGlobaL, for the sale of software to hospitals in Latin America. She assured that she has not carried out any government action in favor of HIMA and that she has “nothing to do” with the hospital system’s debts to the government. She was governor from 2001 to 2005.

Rivera Hernández confirmed that he still works for the Rodríguez family. However, he denied having made any representation in the government in favor of his employer.

Rosario also confirmed that she worked for HIMA but refused to answer the question of whether she had done any government work in its favor.

Former first lady Wilma Pastrana Jiménez could not take a call from the CPI. Meanwhile, García Padilla told the CPI that his now ex-wife worked or had a contract as a CPA with HIMA during part of his term as governor.

“Yes, we had to supplement our income with her employment ,” said García Padilla after indicating that his family did not come from a “wealthy background.” He was governor from 2013 to 2017.

Armando Rodríguez Benítez has made political donations to Governor Pedro Pierluisi (NPP), the House Speaker Rafael Hernández (PDP), Senator Rivera Schatz (PNP), Caguas Mayor William Miranda Torres (PDP), former Governor Wanda Vázquez (PNP), San Juan Mayor Miguel Romero (PNP), and the New Progressive Party (PNP, in Spanish) Municipal Committee in Bayamón.

While his father, Joaquín Rodríguez García, has donated to Senate President José Luis Dalmau (PDP), to Popular Democratic Party (PPD, in Spanish) former gubernatorial candidate Charlie Delgado, to PPD Representatives Javier Aponte Dalmau, José Varela and Rosamar Trujillo Plumey, and the PPD.

HIMA amassed debts with the government since 2009
HIMA owes money to 12 government agencies and the municipalities of Caguas, Bayamón, Fajardo and Humacao.

Among the largest debts, besides that with the PR Treasury Department, are those with Puerto Rico Electric Power Authority (AEE, in Spanish), the Department of Labor, the State Insurance Fund Corporation, the Municipal Revenues Collection Center (CRIM, in Spanish), the Puerto Rico Aqueducts and Sewer Authority (AAA, in Spanish), the University of Puerto Rico and the Department of Health of Puerto Rico, as well as the U.S. Treasury’s Internal Revenue Service. LUMA, the private company that has managed AEE/PREPA since 2021, is also claiming debts amounting to $49 million dating back to 2008, because among its responsibilities is “the collection of accounts in arrears”, the company said in written statements. This means that there must be duplicate charges between PREPA and LUMA’s claims.

In the bankruptcy filing, HIMA and its corporations listed a debt of $27.6 million with the Department of Labor for unemployment insurance and Temporary Non-Occupational Disability Insurance (SINOT, in Spanish) of its employees since 2017.

Labor Secretary Gabriel Maldonado told the CPI that the debts began to accrue in 2009, but the agency is only claiming from 2017 onward because it is the part that is “collectible.” When asked by the CPI about why this debt was allowed to accrue, he said he was not in office during those years.

“For some reason or another, the debt continued to mount until we finally ended up here,” the Secretary said. He added that “there could have been, for example, a referral to the Department of Justice to collect.”

Maldonado assured that, even if an employer has a debt with his agency, as is the case with HIMA, former employees are not affected in their unemployment or SINOT claims because the payment is made with agency funds.

HIMA also owes about $19.1 million to the U.S. Internal Revenue Service for money withheld and not remitted, and $31.2 million to the State Insurance Fund Corporation (CFSE, in Spanish). In addition, it owes $1.2 million to the Department of Health of Puerto Rico (PRDH), including $400,000 from FEMA funds that were awarded to the HIMA hospital in Fajardo to provide COVID-19 vaccination services. According to a letter sent to the institution’s executive director, the PRDH unsuccessfully requested the return of part of this money on three occasions. The PRDH warned HIMA that if they did not make the payment, they would be referred to the Department of Justice and the appropriate federal agencies. Lisdián Acevedo, Health spokesperson, said she referred the CPI’s questions about this matter and whether the referral to Justice was made, to the legal division but as of press time it had not responded.

The IRS stated through press spokesperson Yviand Serbores that they could not issue a reaction because “legally, we cannot talk about a taxpayer’s tax situation.” The CFSE, the AEE, the AAA and the UPR did not answer questions from the CPI about HIMA’s bankruptcy.

‘They approached us to have the debt forgiven’
Reinaldo Paniagua, executive director of the CRIM, said once HIMA lost the tax exemptions decrees for hospital institutions that it had under Act 168 of 1968 because of tax debts, the debt with the CRIM began to accumulate. The Hospital Tax Exemption Act grants incentives that, however, can be revoked if the beneficiary stops complying with tax payments.

Paniagua explained that after the bankruptcy, an agreement was reached in Court that would allow debt forgiveness with the CRIM as long as the buyers of the hospitals continue operating them as hospital entities for two or more years.

HIMA had previously tried to get mayors to pardon debts with the municipalities.

“When they approached us for the first time to have their CRIM debt forgiven, all of us mayors said yes. But we realized that there was something else here, and that there was the possibility that the hospitals would be sold to become something else,” Bayamón Mayor Ramón Luis Rivera told the CPI.

History repeats itself: Puerto Rico’s Treasury ‘unacceptable negligence’
This is not the first time that corporations linked to the Rodríguez family have failed to meet their tax obligations. It also happened between 1977 and 1988, at the defunct San Rafael Hospital in Caguas, in which Rodríguez García, co-founder of HIMA, chaired the Board of Directors. This company also failed to pay taxes withheld from salaries, as stated in a lawsuit.

When more than 10 years later, the PR Treasury Department attempted to impose a penalty for non-payment, members of the San Rafael Board of Directors, including Rodríguez García, successfully sued the PR Treasury Secretary to challenge the penalty.

According to the court ruling, the penalty in a personal capacity was not applicable because it was not legally allowed during the years in which the deficiencies were attributed.

Judge Arnaldo López Rodríguez ruled in favor of the members of the Board of Directors, and determined that the case was statute-barred, but in his ruling, he expressed his dismay at the inaction of the PR Treasury Department to collect the tax debt.

“The laxity with which officials of the [PR] Treasury’s Tax Bureau handled the situation of this tax criminal, that is, the San Rafael Hospital Inc., is surprising and cause for consternation. Even though since 1976 the PR Treasury Department was aware that it was not paying the money for the income tax withheld at the source of the salaries of its employees, it did nothing to effectively stop this situation,” according to the March 16, 1993, ruling.

The money from employee withholdings was illegally used to finance the operations of the hospital institution for 11 years, from 1977 to 1988, the ruling concludes. With the new HIMA corporations, the Rodríguezes did the same, according to three internal sources.

Furthermore, due to the PR Treasury’s “unacceptable negligence” in collecting, as described in the sentence, the government coffers failed to receive $1.8 million. This time the PR Treasury Department allowed the successor company to amass $36 million, a debt more than 20 times greater than the 1993 loss, according to the Chapter 11 filing.

The court ruling explains that while the San Rafael hospital continued to operate, its directors took steps to get the required permits and raise the necessary capital for the construction of a new hospital with a different name, but with some of its directors and officers. The ruling states that the Centro Médico del Turabo Inc. corporation was created. “This new hospital was built as planned and began operations the same year that the San Rafael Hospital declared bankruptcy and ceased operations. The new hospital has the commercial name “Hospital Interamericano de Medicina Avanzada (HIMA),” according to the ruling on the origin of the hospital group that is currently bankrupt again.