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It's now official.
Days before a trial from
debtors seeking $500,000 from the company was to begin, Dr. Notes filed
for Chapter 7 dissolution on May 4.
However, the filing incompletely stated the amount of debt
creditors for the company. Dr. Notes, which had 160 employees in Boca
Raton in 2004 and ceased operations last summer, sold medical records
software to about 5,000 doctors and hundreds still use the program.
During a deposition before attorney Leonard K. Samuels, who
represents Jim Whidden and Philip Datlof in the $500,000 case, Dr.
Notes CEO Angel M. Garcia said the potential liabilities of his company
were in excess of $18.2 million.
The Chapter 7 filing listed Dr. Notes' liabilities at less than
$50,000 and its number of creditors at less than 49. The only creditors
listed were Whidden and Datlof, but the amount of claim was listed as
unknown. The filing created an automatic stay of their trial.
Dr. Notes is facing 57 judgment liens totaling nearly $4.8 million;
seven pending cases seeking a total of more than $1 million; and $1.2
million in federal, state and county taxes, according to a Business
Journal review of cases filed against Dr. Notes and sister company Datamed Worldwide, which was included in the filing.
When a company first files in bankruptcy court, it does not have to
provide all the information on the first day, but it must submit the
schedule of liabilities, statement of financial affairs and corporate
ownership statement within 15 days of the filing, said Brian Gart, a
business bankruptcy attorney with Greenberg Traurig in Fort Lauderdale.
The bankruptcy court gave Dr. Notes until May 21 to file all the required papers.
West Palm Beach attorney Stuart A. Young, who represents Dr. Notes
in bankruptcy court, did not return repeated calls and an e-mail
requesting comment. Garcia did not return an e-mail seeking comment.
The internal medicine specialist said during the deposition he is doing
house calls now.
The filing said the company had less than $10,000 in assets, although it did not list any.
In November 2004, only three months after Dr. Notes was valued at $40 million by accounting firm Daskal Bolton, Garcia signed a deal with wife Maricarmen Beltran to sell Dr. Notes' software license to her company, Intracare,
for $500,000, according to a document provided by Garcia in several
court cases. Intracare, which Garcia said is now owned by an entity in
Cyprus, bills doctors for tech support to use the program.
In March 2005, Garcia signed a deal to take a $500,000 loan with
Whidden and Datlof and use the software license as collateral, even
though it had already been sold. They sued, alleging non-payment.
On April 2, a Broward County Circuit Court judge ruled the
Intracare deal was a fraudulent transfer of assets. His ruling
determined that a $1.46 million judgment South Carolina-based First Choice Healthcare won against Dr. Notes could be collected from Garcia, Intracare, Beltran and two other individuals tied to both companies.
On April 2, a Broward County Circuit Court judge ruled the Intracare
deal was a fraudulent transfer of assets. His ruling determined that a
$1.46 million judgment South Carolina-based First Choice Healthcare won against Dr. Notes could be collected from Garcia, Intracare, Beltran and two other individuals tied to both companies.
Boca Raton attorney Matthew Fornaro, who represents First Choice,
said the Chapter 7 filing would not affect his case. He has filed liens
against the real estate holdings of the individuals.
"I don't think the filing was a smart move on their part, because
now the bankruptcy trustee can go looking under all the rocks for Dr.
Notes' assets," Fornaro said.
Gart said a bankruptcy trustee could go back four years from the
date of filing to recover funds from avoidable transfers and any
transfers found to be fraudulent.
Meanwhile, Whidden and Datlof asked the bankruptcy court on May 9
for approval to pursue a trial in Palm Beach County Circuit Court and
secure their claim.
"We don't believe this [Chapter 7] filing will have any impact on
our ability to recover our collateral," Samuels said. "We have the
first priority in accordance with the uniform commercial code."
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