Judge to rule on unauthorized use of St. Francis funds

Hawaii Medical Center was not authorized to use millions of collateral dollars meant for its former owner, the nonprofit St. Francis Healthcare System of Hawaii, but U.S. Bankruptcy Court Judge Robert Faris has yet to determine what should be done about it.

In a tentative decision filed Feb. 24, Faris said about $4.5 million of a $9 million HMC bank account belonged to creditor and former owner St. Francis. The judge took the matter under advisement after hearing testimony from both sides.

HMC is currently in a bankruptcy case with St. Francis and other creditors. The center, which comprises two hospitals in Ewa Beach and Liliha, used the money from the account to continue operations.

“The unauthorized use of cash collateral is a significant offense and must not be condoned,” Faris wrote in his tentative ruling. The best remedy for the situation, he said, would be to require HMC to replace the money, which might not be possible for the cash-strapped centers. Faris proposed providing a lien on all HMC property to St. Francis. St. Francis attorney Bruce Bennett said it would be a second lien of questionable value, since St. Francis already had a lien on the cash spent.

Bennett said St. Francis does not want a remedy that would have consequences on the hospitals’ service and its patients. “We’ll figure out a way to make that happen.”