A top executive at a for-profit drug rehab company sought to reassure hundreds of employees, including more than 160 in New Haven, who haven’t been paid in weeks.
They needed to hear from someone in charge, especially after the company’s CEO committed suicide and addiction treatment centers in Connecticut, Pennsylvania and Florida suddenly closed.
So he wrote an email to everyone.
When will employees get paid? “We hope to have a clear answer by the end of the week,” Scott Korogodski, chief administrative officer at Retreat Behavioral Health, wrote on June 23.
What are the chances that these employees will be able to keep their jobs?
Retreat is committed to carrying on the late CEO’s mission of “providing quality substance abuse care and mental health services to all communities.”
Three days after sending that email, Korogozki took his own life, and the clinic and treatment center remained closed.
Now Retreat workers are taking their case to court to recover their lost wages.
Those are some of the details contained in a proposed class action lawsuit filed June 27 in federal court for the Southern District of Florida in West Palm Beach.
The lawsuit comes after Retreat abruptly closed its three-state addiction and mental health treatment centers in late June. The shuttered centers include an 80-bed inpatient facility at 915 Ella T. Grasso Blvd. and an outpatient clinic at 1 Long Wharf Dr.
These sudden closures coincided with the suicides of two company executives in a five-day span, hundreds of employees missing their most recent biweekly paychecks, mass patient transfers from Retreat’s care, and deepening financial difficulties for the company in Connecticut, Pennsylvania, and Florida. Meanwhile, a recently filed $17 million foreclosure lawsuit in Palm Beach County provides further details about Retreat’s financial difficulties (see below for more details).
The 15-page proposed class action lists two Florida Retreat employees, Mia Williams and Brittany Calvert, as plaintiffs, “on behalf of themselves and others similarly situated.” The New Haven employees are not listed as plaintiffs, but the suit seeks the court’s permission to authorize a class action that could include more than 750 Retreat employees across Florida, Pennsylvania and Connecticut.
Named as defendants in the lawsuit are Florida-based companies Retreat Behavioral Health LLC and NR Florida Associates LLC, as well as Retreat’s Chief Regulatory Officer Christy Gariano, Retreat’s Chief Financial Officer Alexander Hoinsky, the estate of late Retreat CEO Peter Schorr, and the estate of late Retreat Chief Administrative Officer Scott Korogodsky.
The case hinges primarily on two legal arguments.
First, Retreat violated the federal Fair Labor Standards Act, the Florida Constitution, and Connecticut state law by failing to pay employees minimum wage and overtime pay from June 3 until the company closed on June 21, effectively laying off all of its employees.
Second, the company violated the federal Worker Adjustment and Retraining Notification Act (WARN) by failing to give employees at least 60 days’ notice before they were laid off.
The plaintiffs are seeking payment from Retreat for unpaid wages, overtime pay and other financial damages resulting from the company’s closure.
The lawsuit was filed by Florida-based attorneys Michelle Erin Nadeau, Ryan Barrack and Michael Pancier.
“We intend to vigorously pursue legal action to recover amounts due to our clients and other employees who were terminated without notice and who were not paid what they were owed,” Barak said in an email to The Independent.
Representatives from Retreat companies were not available for comment at the time of publication.
Late payments. Late payments. No payments. Bankruptcy.
The lawsuit details a timeline of delayed payments and subsequent missed payments leading up to the company’s bankruptcy in late June, as well as accompanying corporate communications, as the basis for the plaintiffs’ legal claims against Retreat.
The lawsuit alleges that Retreat paid employees their payroll late on May 25 for the period from May 6 to May 19. It also says that Retreat paid its subsequent payroll late on June 10 for the period from May 20 to June 2.
In the end, Retreat did not pay employees anything for the pay period from June 3 to June 16.
On June 21, the last payday, “Plaintiffs and other employees were informed that CEO Peter Scholl had committed suicide” and that all patients at the West Palm Beach facility would be removed from Retreat’s care “effective immediately.”
The complaints continued: on June 23, Retreat employees received an email from the company’s chief administrative officer, Scott Korogodski, stating that Retreat was “in financial difficulty” and that the company had “yet to receive answers regarding the distribution of payroll funds.”
Korogodski’s email also included clarifications to several other “unanswered questions.”
- When will the money due from payday Friday, June 21, 2024 be paid? We are hoping to have a clear answer by the end of the week.
- Can employees apply for unemployment benefits? We are waiting for guidance from our lawyers regarding UC (unemployment benefits). At this time, we are not authorized to lay off employees. If you are currently employed, you cannot apply for benefits.
- What are the chances that an employee will be retained?RBH Management is committed to continuing Peter’s mission of providing quality substance abuse care and mental health services to all communities. All employees are required to review their own situation and make the best response for their personal and family circumstances.
- Will I still have health insurance? Management has consulted with my broker, and UHC is working with the broker and RBH to ensure I can continue to have coverage.
The next day, on June 24, Korogodski sent a follow-up email to staff, in which he said the Retreat had “no positive updates,” that patients were being discharged and transferred across all locations and levels of care, and that the Retreat was “closing its services.”
“The email stated that employees would receive ‘appropriate letters of employment’ and that payment of last week’s pay was a ‘top priority.'”
Two days later, Korogotsky also committed suicide.
A receiver was appointed in Pennsylvania and one was requested in Florida.
Meanwhile, recent filings in a foreclosure lawsuit in Palm Beach County Circuit Court further highlight just how financially struggling The Retreat was and is.
The suit is about a $17.2 million balance on an initial $21 million mortgage that an affiliate of Retreat took out with a company called Lapis Advisors LP.
On Monday, Lapis filed an emergency motion to appoint a receiver to manage Retreat’s remaining assets and operations in Florida during the foreclosure proceedings in an effort to bring some stability to the troubled company. The purpose was to give the many creditors of Retreat’s Florida companies, including hundreds of unpaid employees, a chance to recover amounts owed to them.
But Retreat’s Florida company’s “financial difficulties and operational turmoil long preceded the deaths of Messrs. Scholl and Korogodski,” the complaint states.
According to Monday’s court filing, Retreat affiliates in Florida and Pennsylvania have already defaulted on their debts and owe three loans totaling about $25 million to Lapis Corp. Retreat affiliates also owe more than $800,000 in unpaid taxes to Palm Beach County.
In early May, Lapis filed a garnishment order against Fulton Bank, freezing deposit accounts (containing approximately $3 million) held by Retreat affiliates in Pennsylvania and Florida that were used to fund the companies’ operations.
Then in late June, shortly after the deaths of Scholl and Korogodski, a Pennsylvania court appointed an experienced hospital manager named James Young as receiver of all of the assets and business operations of Retreat’s Pennsylvania company.
Meanwhile, at a hearing on June 27 in Pennsylvania state court regarding Lapis’ request for the appointment of a receiver, Lapis questioned David Silverstein, manager of Cole Capital LLC and a major investor and co-owner of Retreat.
“Silverstein testified that as a result of the deaths of Scholl and Korogodski, day-to-day operations were no longer continuing at NRFL. [Retreat’s Florida affiliate]”All patients will be discharged or transferred to other facilities,” Monday’s motion states. “Although Coal Capital opposed the appointment of a receiver, Silverstein further testified that there is no revenue available to fund operations and that his company, Coal Capital, does not provide any financial support to NRPA. [Retreat’s Pennsylvania affiliate]Based on information and belief, Coal Capital also declines to provide financial support to NRFL.”
Monday’s motion continues: “Given the exacerbated circumstances resulting from the recent deaths of Messrs. Scholl and Korogodski, and particularly the imminent risk to the assets of the Retreat Companies and the remaining operations of the Retreat Companies, Lapis has no choice but to file this motion to protect the residual value of the business and to request that the Retreat Companies’ trustee salvage portions of the business for the benefit of remaining creditors following recent events.”
The Palm Beach County Circuit Court scheduled a scheduling conference in the foreclosure case for Wednesday morning to discuss when a hearing on Lapis’ emergency motion to appoint a receiver should be held.
This article was originally published by the New Haven Independent on July 3, 2024.