One of the many small Lancaster County businesses left with thousands of dollars in unpaid bills from Retreat Behavioral Health won a $6,406 judgment Friday.
Jason Wellman, CEO of FilterShine, which filed the lawsuit against Retreat in Lancaster County, acknowledged that his victory is not yet final — Retreat has 30 days to appeal the decision in the District Court of Common Pleas.
FilterShine is the first small business in the county to file a claim against Retreat’s multi-state operation since its collapse, but it may not be the last. The Denver-based kitchen exhaust system service company’s victory could open the door to more claims from other small businesses left in the lurch by the Retreat’s collapse, Wellman said.
Retreat, a for-profit addiction treatment and mental health company operating in three states, closed abruptly following the suicides of its founder, Peter Schorr, and chief administrative officer, Scott Korogodsky, in June.
Retreat has at least $30 million in debt and is the subject of multiple lawsuits involving a complicated ownership structure and unpaid bank loans. The Retreat had been struggling financially for months or longer, court documents revealed, to the point that Schorr in early June told the court he was paying three biweekly salaries out of pocket.
SUMMARY: Complete coverage of the closing of Retreat Behavioral Health in Ephrata
Retreat employed approximately 300 combined at its hospital location at 1170 S. State St. in Ephrata Borough and the outpatient location at 333 S. 7th St. in Akron. The Retreat was founded in Lancaster County in 2011.
Court documents filed in at least four states show Retreat and its owners defaulted on loans originally issued by banks and later bought by private hedge funds that specialize in buying distressed debt.
The Retreat’s Lancaster locations were placed into temporary receivership in June. Recipient James Young did not return messages seeking comment for this article. A permanent admission hearing is set for next week in Lancaster Court of Common Pleas. Retreat’s Connecticut operation was placed under another receiver in July. The Florida operation is under a judge’s order for mediation between creditors and a remaining partner, David Silberstein, who has testified that he wants to revive the business and pay off its debts and sell it.
A short listen
No one from Retreat appeared at Friday’s 10 a.m. hearing in East Cocalico Township.
District Judge Clark A. Bearinger said he received an email request from a representative of the Retreat to adjourn the hearing about 23 minutes before it was to begin.
“In my opinion, there is no defense,” Wellman told the judge, referring to the pile of documents he had to show Retreat’s unpaid bills.
Bearinger noted that Retreat’s late request to adjourn was outside of standard procedures and ruled in Wellman’s favor.
After the hearing, Wellman said he has been contacted by other businesses also left with unpaid bills to learn about their claim against Retreat. A LNP | LancasterOnline’s article last month detailed the thousands of dollars businesses say they owe Retreat.
It’s not clear that after private hedge funds haggle over the remains of Retreat whether there will be money for Wellman or other businesses to collect, so business owners have said they are reluctant to hire lawyers to pursue debts. Representing himself in the case in a district court, Wellman said he at least has a chance to get the money he’s owed.
There is still money coming into the Retreat. With the permission of a judge and a creditor, the bank accounts were frozen so the temporary receiver was able to pay some employees for missing June wages. The receiver testified in Florida that he would have enough money to pay creditors. According to testimony in Florida last month, there was about $14 million due from insurance and other payers, half of which is likely to be collected.
Wellman previously said he filed the motion out of principle. He said the loss of money won’t put him out of business, but he filed a claim against the property because his small business completed work for the Retreat. About 30 families benefit from the work outside his offices. Wellman said the delays were typical for the Retreat. He said Retreat had delayed payments since last August. The number of unpaid bills grew so high that he said he turned down new work from the Retreat until he received a payment. It wasn’t until the kitchen at the Retreat’s Ephrata facility was shut down by the state police fire department that a partial payment was made, Wellman said.
Wellman and others have questioned why a court or someone didn’t step in and tell the Retreat to shut down or warn the vendors. Even after creditors obtained court orders to freeze Retreat’s bank accounts at Fulton Bank earlier this year, Wellman previously said it appeared as if the company was doing business as usual. Withdraw scheduled service appointments with his company; after learning of the deaths of the two executives, Wellman said he canceled three meetings.
Wellman had a long relationship with Retreat, which is one reason he continued to work for them. Like other business owners, he said he didn’t want to leave patients at the Retreat without a place to heal.
