Sensational AAC Murder Charges Could be Decided in Matter of Days  E-mail
Addiction Treatment Industry Newswire

01/31/2016 -ATIN - Just about a week ago, American Addiction Centers, the publicly traded (AAC: NYSE) specialist addictions player that is the third addictions enterprise founded by treatment impresario Michael Cartwright took a very important step in what is probably the most controversial battle going on right now in the entire addiction industry. Executives have always gotten the light touch when they commit crimes (so-called White Collar crime) but some under-age kid who steals a car often gets what amounts to a life sentence in terms of a reputational damage and negative consequences. And in this legal environment - which has existed in this country for decades and has become an especially hot issue after the last, second deepest ever recession with issues surrounding possible banking malfeasance in the trillions - some Riverside County DA in California (where? who?) thought it appropriate to put AAC and its President Jerrod Menz in front of a grand jury on 2nd degree murder charges.

Cartwright: Police and Coroner Bolster Defense

That is a practically unheard of step in the annals of anti-corporate U.S. jurisprudence. Not to mention, according to AAC's chief marketer Adam Mittelberg, also never having occurred in the 163-year legal history of California. From the beginning Michael Cartwright has been mystified by these charges, and this quote, drawn from him today by Treatment Magazine, as he was busy watching kids on a Sunday sums up his confusion: "Both the police report and the coroner's report in this case say death by natural causes and no foul play. And I've never seen a situation where a prosecutor has the nerve to seek what are among the most serious criminal charges when the police and coroner are, in effect, witnesses for the defense!"

Motion to Dismiss

On Jan 22, AAC and Menz (in legalese "the corporate and individual defendants") finally got their chance to file a motion to dismiss, which if upheld by Judge Elaine M. Kiefer of California's Riverside County Superior Court (county includes towns Palm Springs and Temecula, HUGE area, lots of desert, 2M pop) it would make this all go away and the case would subside as an interesting to some people extremely minor footnote in U.S., and indeed probably even California's, legal history. If she does NOT grant the motion, things will probably go a lot differently. Because we are sure that Michael Cartwright and Jerrod Menz will fight this tooth and nail, a rather sensational trial may ensue. And Jerrod Menz would then be in a fight for his life at a time right after he has become among the richest men ever to work in addiction treatment, holding stock in AAC that at some point was worth some $200M easily, but has probably fallen off a lot now as the stock market has tumbled and AAC stock even more than the closely followed market averages like the very wide S&P 500 index and narrower 30-stock Dow Jones Industrial index. And for Cartwright, that is what this whole thing has had a lot to do with: the so-called short sellers.

About the "Short Sellers"

Short sellers, keeping it on its simplest level, are investors or traders who have made a trade that makes money when AAC stock falls or, in other words when there's bad news about AAC. And it can't get any worse than when the Wall Street Journal column "Heard on the Street" (arguably the most influential financial column in the nation) mentioned the words "murder charges" in it's headline over a column in December. AAC stock is down big, having fallen from a high of $45 mid-summer last year to a high of around $25 again in October 2015 and now back to about $17.50. That's a highly volatile environment alive with trading opportunity as AAC volumes over the last year averaged about 220 thousand shares a day. But the short seller angle may not carry much weight because it is quite difficult to short the stock of a tiny company like AAC, which involves highly complex maneuvers like "borrowing" the stock in an illiquid specialist Wall Street sub-marketplace called the Securities Loan Market - although larger sophisticated players can get around that in today's controversial over-the-counter traded financial environment rich in trading instruments specifically tailored to single or small groups of investors.

Who Knows?

Who knows? AAC is still very valuable, worth about $400M in market capitalization, but probably at least 3x that if it were to be taken out by a bigger addiction treatment or behavioral health asset aggregator like Joey Jacob's Acadia Healthcare or Universal.

Highly Complex, And Now Headlines Changing

This is a highly complex situation and we are a tiny magazine and, honestly, what complicates matters for us too is that AAC is one of our largest advertisers. And we wrote what we considered a balanced piece in one of our print editions last year. But we have had our doubts about the appropriateness of the 2nd degree murder charges from day one and the doubts even grew, not diminished, as more was revealed over time by talks with Michael and viewing of their site AACTheTruth. Just factoring in our own 10+ years of following the treatment business, and knowing it to handle some of the most at risk patients of any specialized medical population, we have unfortunately heard of death many times happening at treatment centers. And now the financial player news headlines are changing, with Bloomberg News just days agp saying: "Corporate Murder Charge That Destoyed Company's Stock Now in Doubt." Honestly, we were also skeptical of AAC stock at previous Mount Everest heights of $45, seeing that as momentum players pushing in a good, bull market. But, as we said earlier, if AAC is taken out by a bigger medical asset aggregator, $45 could be just the starting point.

Feb 5 Key Date

Anyway, Judge Kiefer on Jan 22 summarily denied prosecutors more time and set a very close Feb 5 for the next court date, at which time a full coroner's report will be presented. A full coroner's report is something which, believe it or not!!, the grand jury was not presented with or, if you listen to the AAC side of things more, may have been deliberately denied access to by overzealous prosecution. It would not be beyond the bounds of possibility for Judge Kiefer to throw out the case against AAC and Jerrod Menz within a matter of days. If so, Mr. Menz, who very appropriately temporarily stepped down from his roles in management and on the AAC board in the wake of the charges, would presumably be back at the office. One thing is for sure, it's coming down to the wire on whether this thing goes away quick or may go to trial.

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Comments (2)Add Comment
Charges were correctly filed due to treatment facilities gross negligence
written by Andy Johnson, January 31, 2016
I am very disappointed with this article's apparent "shock and awe" about the fact that charges were filed against the AAC employees. Their actions fully warranted the charges. In fact, it could be argued that the DA's biggest decision wasn't to file charges but rather "where should I start?'
How about with the fact that the staff failed to provide the patient, Gary Benefield, with a replacement for his oxygen tank even though he presented with a history of pulmonary disease and emphysema and had recently been hospitalized for pneumonia. Or the DA could have led with the fact that the AAC staff gave him both anti-depressants and anti-anxiety medications without a prescription. These meds came from an “extra supply” of medication that they had onsite (well, the meds were onsite until Menz ran down the street with them in a garbage bag).
But wait, there's more...the AAC staff also didn’t check on the patient throughout the night he died, because....well, they were all asleep.
But wait, there's more...the facility's Medical Director at the time of Gary Benefield's death was Dr. Noreen Bumby. Dr. Bumby had created the “detox protocol” that had facility personnel giving patients drugs without a prescription and before being seen by a doctor. Six months prior to Benefield's death the California Osteopathic Medical Board had issued a 17-page complaint against her stating that her license should be either revoked or suspended due to multiple acts of “gross negligence”, which included repeatedly being drunk on the job. Yet, the facility allowed her to continue to work for them.
In sum, if Gary Benefield died of natural causes, so did JFK.
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written by David E. Burke, January 31, 2016
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