TIMELINE OF EVENTS
* 2009-10: Hutcheson Medical Center loses about $14 million * May 2011: Losing about $1 million a month, Hutcheson officials and Erlanger Health System officials enter into a management agreement * June 2013: Hutcheson posts a profit and announces it will enter a leasing agreement with Erlanger for 10 years. But the agreement falls apart after a study of Hutcheson's financial viability and market share value. * August 2013: Hutcheson severs the management agreement, claiming Erlanger did not hold up its end of the pact. * September 2013: Hutcheson seeks other health care providers to take over management. Only Erlanger and Chattanooga company Lincoln Healthcare submit proposals, and Hutcheson accepts neither. * January 2014: Erlanger sues Hutcheson, demanding loan repayment. * February 2014: Hutcheson countersues. Its attorney, former Georgia Gov. Roy Barnes, claims Erlanger did not hold up its end of the management agreement. * July 2014 Erlanger moves to foreclose and auction the hospital's property. * August 2014: A federal judge in Rome, Ga., halts the planned foreclosure, saying that keeping the hospital open is in the public interest and overcoming an auction sale could be "insurmountable" for the hospital. * November 2014: Hutcheson files for Chapter 11 bankruptcy. * April 3, 2015: Hutcheson's attorneys accuse Erlanger of fraud, say Erlanger got secret emails during 2011 negotiations. * April 20, 2015: Erlanger says the emails were not secret.
With an uppercut, Erlanger Health System responded to fraud accusations this week, saying leaders from Hutcheson Medical Center and Walker County, Ga., are liars.
Erlanger and Hutcheson are tangled in federal lawsuits with millions at stake -- half of which might come from the pockets of Walker County taxpayers. Three weeks ago, Hutcheson's attorneys said Erlanger secretly received emails it should not have seen, giving its leaders a competitive edge against the Fort Oglethorpe hospital.
On Monday, Erlanger's lawyer called that accusation nonsense.
"[Hutcheson's] penchant for hyperbole and unfounded accusations against Erlanger is nothing new," attorney Edward Marshall wrote in a U.S. District Court filing. "Desperate circumstances, and a desire to escape from a $20 million debt without paying a cent, have caused HMC and Walker County to do increasingly desperate things.
"But HMC's most recent filing ... takes those acts of desperation from the frustrating to the truly offensive."
Hutcheson CEO Farrell Hayes stands by his attorneys' claim from earlier this month.
Farrell Hayes"We obviously disagree with Erlanger's position and we will be filing a reply with the Court," he wrote in an email Wednesday. "We respect [U.S. District Court Judge Harold] Murphy's ability to decide these issues on their merits and to see beyond the rhetoric in Erlanger's filings."
Walker County Commissioner Bebe Heiskell, meanwhile, said she didn't understand why Erlanger called her a liar, too: "I haven't opened my mouth. So they're not talking about me."
In 2011, when Hutcheson was losing $1 million a month, it entered into a management agreement that contracted Erlanger to manage the North Georgia hospital.
As part of the deal, Erlanger officials gave Hutcheson a $20 million loan. Catoosa and Walker county commissioners agreed to pay that money back if Hutcheson couldn't.
In August 2013, the two hospitals broke up. Erlanger sued Hutcheson to get the $20 million. In turn, Hutcheson sued Erlanger, claiming hospital officials from Chattanooga didn't give Hutcheson the help they promised.
On April 3, Hutcheson's lawyers accused Erlanger of fraud in a court filing. Hutcheson officials said their former lawyer, Ward Nelson, secretly gave emails to Erlanger's leaders in 2011, when the two hospitals negotiated the management agreement.
In the filing, Hutcheson's new lawyer asked Murphy to make Erlanger give the Fort Oglethorpe hospital at least $60 million in damages.
On Monday, Erlanger's lawyers said in a court filing that their opponent's argument is based on a lie.
Yes, Nelson gave Erlanger officials emails to and from Hutcheson's leaders. But, Erlanger said, those emails were not protected by attorney-client privilege. They only contained public information about Hutcheson's desperation for money.
Of the emails in question, Nelson and Hutcheson exchanged the first one on Feb. 23, 2011. At that point, Erlanger officials were already watching Hutcheson's ship begin to sink. Bill Cohen, a board member of the hospital authority that governs Hutcheson, told the Times Free Press in January 2011, "Probably half the people in three counties know we're broke."
Two weeks later, Hutcheson Chief of Staff Dr. Steve Perlaky told the newspaper, "The only way to survive is to merge services with Erlanger."
And even if that information wasn't public knowledge, Erlanger's lawyers wrote in Monday's court filing, the emails between Hutcheson and Nelson still weren't protected by attorney-client privilege because other people besides Erlanger officials read the messages.
The Catoosa and Walker county commissioners and lawyers also saw the emails. Earlier this month, Hutcheson argued that the local government officials could read the messages, too, because in 2011 they were on the same team as Hutcheson.
Erlanger attorney Jeff Woodard said that's not true. During the six months when the hospitals negotiated a management agreement, he said in a court filing, Walker County Attorney Don Oliver upset officials from Catoosa County, Hutcheson and Erlanger, "jeopardizing HMC's chances to survive."
In March 2011, Woodard said, Walker County rejected a management agreement between the hospitals, demanding that new attorneys examine it.
Even inside Hutcheson, court filings show, members of the hospital authority argued with another one of the hospital's boards, one of many governing bodies inside Hutcheson's tangled web of power. The hospital authority had actually created that board in 1995, something Oliver said its members must now regret.
"Like a terminator robot from a modern horror movie," Oliver wrote in an email to the hospital authority in March 2011, "it has taken a life of its own; it is literally trying to stamp out and eliminate its creator."
Oliver, who also compared Erlanger and Hutcheson to "Keystone Cops" in the email, did not return a call seeking comment.
Contact staff writer Tyler Jett at tjett@timesfreepress.com or at 423-757-6476.