October 25, 2023

Senators Warren, Durbin, Lawmakers Call on Corizon Health, Inc. to Answer for Abuse of Bankruptcy System, Evasion of Liability after Years of Corporate Wrongdoing

“The bankruptcy system has many aims, but it was not designed to provide an avenue for companies to evade accountability for wrongdoing” Corizon has positioned itself “to pay pennies on the dollar to claimants that deserve recompense for poor health outcomes and unpaid debts”

Text of Letter (PDF)

Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.) and Dick Durbin (D-Ill.), Chair of the Senate Judiciary Committee, along with Senators Mazie Hirono (D-Hawaii), Jeff Merkley (D-Ore.), Richard Blumenthal (D-Conn.), Ron Wyden (D-Ore.), Bernie Sanders (I-Vt.), Peter Welch (D-Vt.), and Cory Booker (D-N.J.) sent a letter to Corizon Health, Inc.-affiliated companies Tehum Care Services, Inc. and YesCare Corporation (together, “Corizon”), condemning Corizon’s use of the Texas Two-Step maneuver to evade liability after years of wrongdoing, and requesting greater transparency in the company’s bankruptcy and settlement negotiations.

“We urge you to use the full financial capabilities of YesCare, Tehum, and any other entities as appropriate, to provide full relief for meritorious claims against Corizon by all incarcerated people, their families, former employees, and third-party medical providers — notwithstanding your attempts to circumvent these claims through the bankruptcy process,” wrote the lawmakers.

Corizon, one of the largest providers of prison health care services in the country, is facing an onslaught of serious claims, including malpractice, patient neglect, and contractual claims. Thousands of victims have filed lawsuits against the company, detailing often life-or-death circumstances where Corizon failed to attend to the care and safety of its patients.

“Rather than facing victims and their families in court, Corizon attempted to shield itself by employing the so-called ‘Texas Two-Step,’ a maneuver through which companies leverage bankruptcy proceedings to attempt to evade liability and, as characterized by Tehum Director Isaac Lefkowitz, ‘force plaintiffs into accepting lower settlements,’” wrote the lawmakers.

Corizon carried out this evasive maneuver in 2022 by changing the incorporation of the company from Delaware to Texas and then splitting it in two, creating YesCare and Tehum. YesCare was given Corizon’s assets and revenue, while Tehum received the company’s liabilities. The latter, essentially a shell company, filed for Chapter 11 bankruptcy protection earlier this year, “attempting to dispose of claims by victims and families as well as contractual claims by former employees and contractors alleging failure by Corizon to satisfy their agreements.” The companies have attempted to extend bankruptcy protections to the non-bankrupt entity YesCare, sheltering its assets from victims and freezing litigation against it.

“Your company has taken this abusive strategy a step farther — using it not only to escape tort lawsuits, but also to avoid paying your bills for tens of millions of dollars’ worth of goods and services provided to Corizon by hospitals, small businesses, and your own former employees,” wrote the lawmakers.

In addition to their serious concern with Corizon’s abuse of the system and the detrimental effect it will have on claimants, the lawmakers also requested that YesCare and Tehum answer questions regarding: the nature of their corporate structure and Lefkowitz’s role in the companies; Corizon’s split into YesCare and Tehum; which claims against Corizon and related companies would be affected by the bankruptcy filing; and the companies’ behavior during the bankruptcy, particularly given the secret romantic relationship between the attorney representing YesCare during the bankruptcy plan negotiations and the judge mediating the negotiations.

“This misuse of the bankruptcy system is unacceptable, and we are concerned that it may result in the denial of hundreds of claims stemming from the substandard care incarcerated people have received under Corizon’s watch,” concluded the lawmakers.

Senator Warren has long fought to hold big corporations accountable for harms to individuals, to combat abuses of the bankruptcy system, and to improve health care for incarcerated people:

  • In February 2023, Senators Warren and Durbin led lawmakers in calling on the Seventh Circuit to reject 3M’s attempt to use a maneuver similar to the Texas Two-Step to evade accountability to military veterans.
  • In November 2021, Senator Warren joined Senators Durbin and Blumenthal, along with former Representative Carolyn B. Maloney (D-N.Y.) and Representative Raja Krishnamoorthi (D-Ill.) in sending a letter to Johnson & Johnson objecting to the company’s efforts to manipulate bankruptcy laws to evade accountability for harm caused by its products.
  • In September 2021, Senators Warren and Cornyn (R-Texas) introduced the Bankruptcy Venue Reform Act which would require large corporations to file for bankruptcy in their home state, or where significant assets are located. 
  • In July 2021, Senator Warren introduced legislation to prohibit the use of non-consensual, non-debtor releases that have helped entities and individuals, like members of the Sackler family, escape accountability for wrongdoing through bankruptcy proceedings. In addition, the legislation would direct judges to dismiss bankruptcies by companies who have employed the Texas Two-Step maneuver.
  • In May 2021, Senators Warren, Ed Markey (D-Mass.), Chris Van Hollen (D-Md.), Richard Blumenthal (D-Conn.), Tammy Baldwin (D-Wis.), Bob Menendez (D-N.J.), Cory Booker (D-N.J.), Amy Klobuchar (D-Minn.), and Alex Padilla (D-Calif.), wrote to the U.S. Department of Health and Human Services (HHS) urging Secretary Xavier Becerra to use new funding authorized by Congress in the American Rescue Plan Act of 2021 and his authority under the Public Health Service Act to take immediate and aggressive action to help manage COVID-19 outbreaks in federal, state, and local correctional facilities.
  • In March 2021, Senators Warren, Cory Booker (D-N.J.), and Durbin sent a letter to the U.S. Department of Justice Office of the Inspector General (OIG) urging them to conduct a comprehensive review of all COVID-19-related deaths of incarcerated individuals in the custody of the Federal Bureau of Prisons (BOP) and BOP staff since the beginning of the pandemic.
  • In January 2021, Senator Warren sent a letter to Genesis Healthcare, Inc. (Genesis), one of the nation's largest nursing home chains and the purported owner of YesCare, asking why its top executives, including its recently retired former CEO, have received millions of dollars in bonuses after more than 2,800 of their residents died of COVID-19 and despite the fact that the company has accepted $300 million in taxpayer-funded aid.
    • In March 2021, Senator Warren released Genesis’s response to her January 2021 letter and sent a letter to the company, revealing new information that the company’s CEO – who left the company in near bankruptcy in January 2021 – has been awarded $8 million in salary and bonuses since the start of the pandemic. Senator Warren raised new questions about why the company lavishly rewarded its CEO after more than 2,800 of its residents died of COVID-19 and despite the fact that he left the company in dire financial conditions. 
  • In December 2020, Senator Warren released the findings of the May 2019 investigation she opened into the American Correctional Association (ACA) – the nation's largest accreditor of prisons and immigration detention Facilities – and its relationship with the three largest private prison companies that receive ACA accreditation: CoreCivic, GEO Group (GEO), and Management & Training Corporation (MTC).