%1

The Borrego Community Health Foundation, which filed for chapter 11 protection earlier this year amid a criminal investigation into its finances, has agreed to mediation to try and resolve disputes with creditors and regulators, the San Diego Union-Tribune reported. Officials from the health care provider known as Borrego Health joined creditors and California Department of Health Care Services lawyers in agreeing to non-binding negotiations that will be overseen by an independent court-appointed official. “Because litigation is time-consuming and expensive, it is beneficial to both Borrego Health and our patients if we are able to sit down with DHCS in front of a judicial officer and resolve our issues quickly,” Borrego Health spokesperson Daniel Kramer said. “This more efficient process also benefits our patients by allowing our managers and other team members to spend more time focusing on providing excellent medical care,” he said. State regulators did not respond to a request for comment on the mediation effort. They previously have resisted discussing Borrego Health beyond saying they are working to protect its patients. Meanwhile, businesses and others owed tens of millions of dollars by Borrego Health set up a committee to represent their interests before the bankruptcy court. An attorney for the committee said he welcomes the plan to negotiate a settlement.

The first tip arrived last December. In an email to a Justice Department official, an anonymous author called for a probe into the handful of private companies that courts enlist to process paperwork in big bankruptcy cases, Bloomberg News reported. The concern: some of these companies, known as claims agents, were selling data to a new market maker, Xclaim Inc., which facilitates the buying and selling of the debts of bankrupt companies. The deals allowed claims agents to profit from the trades. What followed is a courtroom reckoning that threatens to disrupt the quietly lucrative world of bankruptcy administrators and a niche, multibillion-dollar financial market that depends on them. Several claims agents face judicial sanctions in New York City, one of the nation’s busiest bankruptcy districts. A worst-case scenario could see the companies barred from doing business with those courts entirely, putting millions of fees at risk. Bankruptcy Judge Martin Glenn has ordered each claims agent in his district to explain whether they cut deals with Xclaim and disclose a detailed accounting of the arrangements. He’s also weighing sanctions against Xclaim’s founder and another employee for publicly disclosing the contact information of federal employees during the proceedings.