A Boca Raton investment adviser who worked with President Biden’s brother James on a failed health service financing deal faces accusations he diverted investor funds, without notifying the investors, to the company that planned to finance the project.
Michael E. Lewitt, 66, and his firm Third Friday Management LLC were accused by the U.S. Securities and Exchange Commission of “fraudulent conduct and gross breaches of fiduciary duties” for allegedly making loans with money he managed in the Third Friday Total Return Fund L.P.
In a lawsuit filed on Sept. 29, the SEC also accused Lewitt of misappropriating at least $4.7 million of investor funds for his personal use, including more than $900,000 to pay a personal IRS tax lien.
President Biden’s brother, James B. Biden, was not charged in the SEC complaint. But in 2020, he and Lewitt, along with others involved in a proposed deal to purchase a rural health care operation, settled a lawsuit accusing the businessmen of a scheme to steal the operation’s business model.
Reached by phone, Lewitt issued this statement in response to the SEC accusations: “While I respect the SEC and its mission, I strongly reject the allegations in the complaint, which are contradicted by documentary evidence, and look forward to resolving this matter as quickly as possible.”
The SEC’s suit said Third Friday’s Total Return Fund, which had been investing since 2012 in S&P 500 index options with “full liquidity,” suddenly changed course in January 2018. Without telling investors, the fund went on to make 45 separate loan advances totaling more than $19 million over the next two years “to a distressed company that acquired and operated struggling rural hospitals,” the suit states.
The “distressed company” that accepted the loans was not identified in the SEC’s complaint, nor was it accused of wrongdoing by the SEC.
A close reading of a 2019 civil lawsuit involving Lewitt, James Biden, and two medical providers, among others, reveals that the company was likely Fort Lauderdale-based Americore Health LLC.
The SEC’s suit described the distressed company as one “that acquired and operated struggling rural hospitals” while the 2019 civil suit described Americore as “in the business of acquiring and turning around struggling rural hospitals.”
The SEC’s lawsuit said the loan recipient filed for bankruptcy in December 2019 in the Eastern District of Kentucky. That was the same month and location of Americore Health’s bankruptcy filing, court records show.
Asked via email if the company left unidentified in the SEC lawsuit was Americore, an SEC spokesman said, “We decline comment beyond the public filings.”
Americore worked with Lewitt and James Biden to solicit outside investor interest in the medical providers’ operations — a health-care delivery model intended to link at-risk rural residents to area hospitals, according to the 2019 suit.
James Biden, the 2019 suit states, first introduced himself to one of the providers with a business card identifying himself as an Americore “principal.” A photo of the business card was included as an exhibit in the lawsuit. Further, the suit states, Biden promised the providers that their Intensive Outpatient Model would play an integral role in healthcare policy “at the highest levels of the United States government,” according to the suit.
Exhibits filed in the case said that Biden mentioned that his brother’s connection to labor unions and the Department of Veteran Affairs would help get the business model expanded nationwide.
Instead of finding investors, the 2019 suit claimed, Lewitt, James Biden, Americore and others pursued a goal of stealing the providers’ business model while “stringing (them) along” in order to drive them into bankruptcy.
In their response, the defendants said they had no knowledge of how Biden identified himself and as such, denied the claim he identified himself as a principal. The response did not address claims that he promised his brother’s help in expanding the business model. They denied intending to drive the providers into bankruptcy and steal their business model, saying the claim “defies logic” because they had nothing to gain and much to lose from its failure.
Biden, Lewitt, Americore and their partners counter-sued, saying the deal failed because the medical providers misrepresented the success of their business model. The suit and countersuit were settled in May 2020 under confidential terms.
The SEC’s suit said that Lewitt also failed to disclose to the fund’s investors that he had a financial interest and partnership with a group of private affiliated companies that invested in distressed health care companies and had committed to investing $30 million to the now-bankrupt financing company.
The 2019 lawsuit states that the Third Friday Fund made 10 loan agreements to one of the providers between July and December 2018 to cover payroll and other expenses while Lewitt, Biden, Americore and their partners purportedly pursued investors.
The SEC charged Lewitt and Third Friday Management with 12 counts of violating U.S. securities laws. The SEC’s lawsuit seeks disgorgement of all “ill-gotten gains,” including prejudgment interest, civil penalties, and restrictions on future securities trading activities.
A trustee overseeing Americore’s bankruptcy proceeding sued James Biden in 2022 over $600,000 in payments he received from the company. Biden said the payments were for financial and consulting services he provided but agreed in September 2022 to pay $350,000 to settle the suit.
Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at .
