Cano Health Founder Marlow Hernandez Faces Fraud Trial Amidst Bankruptcy Fallout
The future of former Cano Health CEO Marlow Hernandez hangs in the balance this week as a jury trial commences, centered around allegations of fraud and corruption that plaintiffs claim directly contributed to the company’s dramatic downfall and subsequent bankruptcy. This marks the first time Hernandez will defend himself in court regarding his conduct during his tenure at the senior-focused primary care provider he founded in 2009.
A Rapid Rise and Precipitous Fall
Cano Health experienced a meteoric rise, becoming a publicly traded company in 2021 through a Special Purpose Acquisition Company (SPAC) merger valued at $4.4 billion. However, the company’s fortunes reversed sharply. In early 2023, three board members resigned, citing concerns over the company’s governance strategy as the stock price plummeted 80% within a year. just months later, in February 2024, Cano Health filed for Chapter 11 bankruptcy protection – a move largely anticipated by industry analysts.
Many experts attributed the bankruptcy to a combination of factors, including aggressive and ultimately unsustainable growth strategies, poor market selection, and fundamental mismanagement. The unfolding trial promises to shed light on whether fraudulent activity played a pivotal role in the company’s collapse.
The $72 Million Lawsuit: Allegations of Deceptive Practices
The plaintiffs, onsite Dental and its subsidiary CD Support, are seeking over $72 million in damages, alleging Hernandez deliberately misled them into entering two significant business agreements totaling over $30 million. At the heart of the dispute lies a partnership intended to integrate dental clinics within Cano Health’s primary care facilities, backed by guaranteed monthly fees projected to reach hundreds of millions of dollars over a twenty-year period.
According to Joseph Mamouna, an attorney representing Onsite Dental, Hernandez presented a compelling vision of cano Health expanding its value-based care model to encompass dental services, positioning Onsite as a crucial partner for national scaling. Though, the plaintiffs contend that this vision was built on a foundation of falsehoods.
Key Allegations: Misrepresentation and Personal Enrichment
The lawsuit details accusations of fraudulent misrepresentation concerning Cano Health’s financial stability, internal contract approvals, and adherence to healthcare regulations. Plaintiffs claim Hernandez knowingly misrepresented these critical facts, leading to a subsequent halt in payments – exceeding $5.5 million in outstanding invoices – from Cano Health.
Onsite Dental alleges they invested heavily in infrastructure,staffing,and equipment to establish Cano-branded dental clinics,operating under the expectation of consistent,guaranteed revenue. The abrupt cessation of payments, they argue, decimated their cash flow, forcing the closure of operations, widespread layoffs, and the abandonment of numerous clinic build-outs.
The most damning allegation centers around claims that hernandez exploited the Onsite Dental deal for personal gain. Mamouna stated that finding evidence suggests Hernandez used the arrangement to “line his and his wife’s pockets.” The lawsuit accuses Hernandez of fraud, negligent misrepresentation, deceptive trade practices, and unjust enrichment.
Implications for the Healthcare Industry
This trial extends beyond the fate of one individual and one company.It raises critical questions about transparency, accountability, and ethical conduct within the rapidly evolving healthcare landscape, particularly concerning value-based care models and aggressive expansion strategies. The outcome could have significant ramifications for future partnerships and investment decisions within the industry.
MedCity News reached out to Marlow Hernandez for comment but did not receive a response.
(Image credit: tiero, Getty Images)
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