A bankrupt unit of nursing-home operator Consulate Health Care won court approval to put itself up for sale, along with the rights to try to collect on a $258 million whistleblower judgment against its other nonbankrupt corporate affiliates, WSJ Pro Bankruptcy reported. CMC II LLC, a back-office manager for Consulate-run nursing homes, filed for bankruptcy last month along with two affiliated nursing homes, saying they couldn’t pay a $258 million judgment they faced for overbilling government health programs. CMC is now seeking to sell itself out of bankruptcy, and has named a Consulate affiliate as the lead bidder after it offered $3 million. The assets up for sale include CMC’s legal rights to seek compensation from its solvent corporate affiliates over the judgment that bankrupted it. Litigation financiers have expressed interest in purchasing the legal claims, according to testimony by CMC’s top restructuring officer. Lawyers for unsecured creditors, including the whistleblower who won the judgment, Angela Ruckh, are wary of the legal claims ending up in the hands of the lead bidder. In court hearings on Thursday and Friday, they said that putting CMC in the hands of a Consulate affiliate that has not filed for bankruptcy would simply bury the judgment, which could otherwise be asserted against other Consulate units. By Friday, the only concession won by Ms. Ruckh and other unsecured creditors was a two-month delay in the sale deadline, from May to July.
