Biden’s Connections Flaunted by His Brother to Defraud Health Care Startups, Lawsuit Alleges

August 27, 2019 Updated: August 28, 2019

James Biden, the brother of presidential candidate and former Vice President Joe Biden, told potential business partners that their health care startups could get more business through Joe Biden’s government and union connections, according to court documents.

The startups allege that James Biden and his associates stole the companies’ intellectual property and tried to bankrupt them through a fraudulent investment and loan scheme.

One of the companies is Diverse Medical Management (DMM), which operates in Tennessee, Texas, Kentucky, Alabama, and Pennsylvania, offering an outpatient treatment model in areas such as substance abuse and senior care.

The other is Azzam Medical Services (AMS), a provider of medical services primarily to nursing homes.

Joe Biden wasn’t accused of wrongdoing in the companies’ July 22 lawsuit.

The defendants have denied the allegations.

‘Connections’

Michael Frey, DMM president and chief executive, met with James Biden in January 2018 at the Pineville Hospital in Kentucky to present the DMM model. James Biden gave him a business card that said he was a “principal” at Americore Health, a startup that promised—and later failed—to manage the financially troubled rural hospital.

At one point, while Frey was presenting DMM’s plan for intensive outpatient treatment, James Biden interrupted him to say, “My brother needs to have you in every court system in America,’” Frey said in an Aug. 21 sworn statement. Biden was allegedly suggesting that DMM would be used by the federal government for court-ordered outpatient treatment.

“I left the meeting very excited and optimistic about the future of DMM,” Frey said.

AMS owner Mohannad Azzam first spoke with James Biden during a call between mid-October and early November of 2018, Azzan said in his Aug. 21 sworn statement. Frey was also on the call.

“During this conversation, James Biden mentioned that his brother’s connections to labor unions and the Department of Veterans Affairs would help DMM expand its model nationwide,” Azzam said.

Shortly before Joe Biden declared his presidential bid, Azzam was on the phone with Frey and James Biden again.

“[James] Biden told Michael Frey and me that the DMM psychiatric care model would be used by Joe Biden as part of his campaign for president of United States, or words to that effect,” Azzam said.

Mitchell Cohen, former general counsel for DMM, recalled a Sept. 4 dinner meeting with Frey, James Biden, and two others in a Philadelphia suburb.

James Biden said “that he could facilitate communications and possible contracts between DMM and the Department of Veteran Affairs, due to the connections that his brother, Joe Biden, had with the Department,” according to Cohen’s Aug. 22 sworn statement.

“James Biden also stated that he could facilitate contracts between DMM and first responders, based on the relationships that his brother had with certain labor unions.”

David Fuscus, spokesperson for the defendants, responded in an Aug. 26 release, saying “the only purpose of these [sworn] statements is to throw press bombs at Jim Biden because of who he is.”

He called the lawsuit “a cynical attempt to manipulate the press by taking advantage of Jim Biden’s public profile as the brother of a presidential candidate.”

Investment That Wasn’t

Biden and his associates promised to invest $10 million into the two companies and instructed them to expand their business. As the expenses of the two companies grew, Biden’s associate, hedge-fund manager Michael Lewitt, provided DMM hundreds of thousands in credit to keep it afloat and had Frey sign several unsecured loan agreements.

“Lewitt reassured me that these agreements were a mere formality … and that these loan agreements would be repaid exclusively by the investment money,” said Frey.

In late 2018, however, “it became clear” to Cohen and others at DMM “that the Biden/Lewitt team had no intention of following through on their funding commitment to DMM,” Cohen said.

Instead, Frey and Azzam learned that a white paper they sent to Biden was pitched to Turkish investors as if the DMM model was developed by Platinum Global Healthcare Partners, an affiliate of Lewitt’s hedge fund, Third Friday Total Return Fund.

When Frey and Azzam threatened legal action, Lewitt’s fund retaliated, the plaintiffs said, by demanding its money back.

The defendants responded in an Aug. 26 filing, denying the allegations. They said they pulled out of the proposed investment because DMM and AMS had “overstated their operational successes to Defendants; … failed to provide required and accurate financial due diligence information to Defendants; and … concealed from Defendants that DMM had acquired two other health care companies that significantly inflated DMM’s operating cost structure.”

They said James Biden’s wife, Sara Biden, “assisted in drafting” the white paper and that she told DMM and AMS that it “would be submitted as a joint proposal.”

They also denied that James Biden “had a financial interest in Americore.”

Update: The article has been updated with a response from the defendants.

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