Podiatrist’s Purchase of Convention Center Gives Texarkana Officials Cold Feet

A Texas podiatrist with a past that includes a federal conviction wants to buy the troubled Arkansas Convention Center & Holiday Inn out of bankruptcy — and that has some Texarkana officials on the Arkansas side concerned.

City officials say they haven’t heard from Dr. James J. Naples about his plans for the convention center. In December, Naples entered into a $6.6 million purchase agreement with Dr. Hiren Patel, who owns the property through his Texarkana Hotels LLC. The sale ultimately would have to be approved by the bankruptcy court.

“We are as much in the dark as you are,” Ruth Penney-Bell, mayor of Texarkana, Arkansas, told Arkansas Business. “I have never heard of his having any experience in this sort of thing, not even being a hotel or motel” operator.

She said the city has invested more than $9 million in the convention center project, which opened in 2013, about a year after a convention center opened on the Texas side of the city. Penney-Bell said the city has no voice in the convention center’s operation.

Several messages left at Naples’ medical office in Texarkana, Texas, drew no response. Messages and emails to the attorney representing Naples in the purchase, Kyle B. Davis of New Boston, Texas, also brought no response.

Naples, who has practiced podiatry for more than four decades on the Texas side of Texarkana, also is known for buying properties in financial distress, according to an Arkansan who was in business relationships with Naples. The Arkansan asked that his name not be used because he had been involved in a lawsuit with Naples.

The 27,000-SF, $15 million convention center and 127-room Holiday Inn would seem to be the kind of property Naples finds attractive. It lost $381,000 on revenue of $2 million between April and January, according to financial reports in its bankruptcy. And Naples is familiar with Patel. In January, Naples bought the 81-room Country Inn & Suites in Texarkana, Texas, out of bankruptcy, paying $2.9 million to Patel’s Krishna Associates LLC.

Naples’ biggest deal, though, appears to be selling his AmiCare Behavioral Centers LLC of Fayetteville to publicly traded Acadia Healthcare Co. of Franklin, Tennessee, for $113 million in late 2012. AmiCare was the largest provider of behavioral health services in western Arkansas and did business as Vista Health, operating three inpatient psychiatric treatment facilities in Fayetteville, Fort Smith and Texarkana. It also operated the Piney Ridge Center, a residential treatment facility in Fayetteville, and eight outpatient treatment centers throughout western Arkansas.

More than a decade ago, Naples made headlines for legal troubles. In 2005, he pleaded guilty to one count of conspiracy to obstruct justice and was ordered to pay $2 million in restitution and sentenced to probation for two years. As a result of that conviction, the Texas State Board of Podiatric Medical Examiners suspended Naples’ medical license for three months in 2006 and fined him $75,000.

Hell’s Kitchen
Naples grew up in a part of New York known as Hell’s Kitchen. “This man was not born with a silver spoon,” his attorney, David Botsford of Austin, Texas, said at Naples’ April 2005 sentencing hearing. Naples “brought himself up by his own bootstraps from a tiny hovel of a family home in New York City.”

Naples received his podiatric medicine degree in 1974 from the Dr. William M. Scholl College of Podiatric Medicine at Rosalind Franklin University of Medicine & Science in North Chicago, Illinois, which has produced approximately a third of all practicing podiatric physicians in the United States. He moved to the Texas side of Texarkana in the early 1970s.

Botsford told the judge during the 2005 sentencing that Naples is “a man of his word, a man of integrity, a man that is devoted to his family.”

Naples owned and operated the 63-bed New Boston General Hospital in Texas.

“He made his first million at New Boston hospital. That’s where he got his start,” said the business associate. “He did a huge amount of surgeries there.”

The hospital activity caught the eye of state and federal investigators.

Fraud Allegations
In February 2004, Naples and eight others who worked at the hospital were indicted in U.S. District Court in Texas on charges that included racketeering and Medicare fraud. The 134-count indictment accused Naples of leading the “other doctors to overbill Medicare and persuaded an assistant to help him perform unauthorized cancer research,” according to an April 2004 article in the Houston Chronicle.

“We vehemently deny all the accusations and look forward to proving our innocence in court,” Keith Naples, son of Dr. Naples and the administrator of the hospital, told the newspaper.

Naples wasn’t under indictment for long. About three months later, in May 2004, a federal judge dropped the charges against Naples and his co-defendants. At the request of the defendants, the documents in that case were sealed, which is an unusual move.

But the dismissal of the charges against Naples didn’t end his dealings with the federal government.

In September 2004, Naples was charged with one count of obstruction of justice for causing “an employee to fail to produce airplane trip logs, … which were required to be produced” by a grand jury subpoena dated in August 2003, according to the information sheet filed in U.S. District Court in the Texarkana, Texas, Division.

Federal prosecutors considered Naples a flight risk and prevented him from using his Beechcraft King Air B100 Turboprop plane, according to the April 2004 Houston Chronicle article. Naples, however, did receive permission to use the plane to fly from Texarkana to Fayetteville and back to watch his son graduate from business school in December 2004.

Not long afterward, Naples pleaded guilty to the obstruction charge.

At his sentencing hearing in April 2005, Naples was given two years of probation and ordered to pay $2 million in restitution to the Department of Health & Human Services, the federal agency that oversees the Centers for Medicare & Medicaid Services. Naples also was sentenced to 250 hours of community service.

Naples apologized and told the judge, “I assure you I won’t be back.”

After being on probation for about 14 months, Naples asked U.S. District Judge David Folsom to end his probation early. The $2 million restitution had been paid, and “he has far exceeded his 250 hours of community service,” Botsford said in a pleading. “His attitude has been exceptional and he has done everything the Court required of him.”

Folsom granted the early termination of Naples’ probation on Nov. 3, 2006.

More Deals
Released from probation, Naples continued buying property.

Through an entity called Pinewood Healthcare Realty LP, Naples bought an On Deck batting cage in Fayetteville in September 2007 for $375,000 after it had been an asset in a bankruptcy. The 18,300-SF building on 1.4 acres now has an estimated market value of $2.2 million, according to the Washington County assessor’s record.

Other properties in bankruptcy also caught Naples’ attention.

Naples was one of six parties who submitted bids in November to buy the Country Inn & Suites on the Texas side of Texarkana out of bankruptcy from Hiren Patel and his father, Dineshchandra Patel, through their company, Krishna Associates LLC.

Krishna Associates had filed for Chapter 11 bankruptcy reorganization in November 2015 and listed $5.3 million in debts and $3.2 million in assets. The company’s bankruptcy attorney, Bill F. Payne of Paris, Texas, didn’t respond to calls or an email.

Naples was the winning bidder, and the $2.9 million in proceeds from the sale went to MidSouth Bank of Lafayette, Louisiana, which was the leading creditor.

Hiren Patel and his father also own the Arkansas Convention Center & Holiday Inn, through their company Texarkana Hotels, which filed for Chapter 11 reorganization last March. It listed $10.6 million in debts and $5.2 million in assets.

The convention center project has previously been a source of controversy.

Between 2009 and 2012, Harold Boldt, then city manager of Texarkana, Arkansas, persuaded city directors to approve several deals and incentives so Patel would develop the convention center project and a water park, which he operates under Holiday Springs Water Park LLC. That company is not in bankruptcy.

In 2014, a legislative audit found several violations of state law in the city’s handling of the development, but no criminal charges were brought.

Meanwhile, revenue was increasing at the convention center and hotel, growing from $1.85 million in 2014, its first full year of operation, to $2.46 million in 2015.

MidSouth Bank, though, said Patel’s company defaulted on $10 million worth of loans and wanted to foreclose. That triggered the trip to bankruptcy court to stop the foreclosure action.

(See: Midsouth Bank Accuses Arkansas Convention Center Owner of Fraud.)

The property went up for bid in January, with Naples winning the bid. But objections to the sale were filed, including one by the Advertising & Promotion Commission in Texarkana, Arkansas, which pays the company almost $235,000 annually as incentive for operating the property. The A&P Commision said it shouldn’t have to continue to make those payments to a new owner.

A&P Commission Chairman Buddy Allen said he hasn’t talked to Naples about the purchase of the property. Naples hasn’t requested that the A&P tax incentives continue under his ownership, Allen said.

“I do not know what his plans are if he is the successful bidder,” Allen told Arkansas Business.

A hearing on the sale is scheduled for March 17 in front of Bankruptcy Judge Brenda T. Rhoades in Plano, Texas.

Arkansas Convention Center & Holiday Inn
Texarkana, Arkansas

Monthly
Operating
Report
Total
Cash
Gross
Revenue
Total
Operating
Expenses
Net
Profit
April 2016 $199,715 $140,437 $103,685 -$14,422
May $304,345 $273,508 $144,381 $73,214
June $284,239 $204,977 $200,569 -$51,505
July $197,743 $260,828 $165,668 -$115,078
August $228,820 $232,922 $177,308 $299
September $134,609 $164,192 $204,503 -$125,588
October $140,244 $197,786 $160,544 -$25,741
November $169,018 $244,044 $171,210 -$2,603
December $111,033 $153,675 $178,524 -$89,362
January 2017 $108,152 $192,679 $166,148 -$29,968
Totals   $2,065,048 $1,672,540 -$380,754

Source: Monthly Operating Reports filed in Texarkana Hotels LLC’s Chapter 11 Bankruptcy in U.S. Bankruptcy Court in Texas. The reports started being filed in April 2016.

from Banking & Finance – ArkansasBusiness.com http://www.arkansasbusiness.com/article/115833/podiatrists-purchase-of-convention-center-gives-texarkana-officials-cold-feet

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s