Lawmakers have sent a letter to Genesis HealthCare’s leadership, accusing its private equity investors of “looting” and contributing to the company’s Chapter 11 bankruptcy filing over the summer.

Genesis, one of the largest skilled nursing providers in the U.S., operates nearly 200 nursing and senior living facilities and over 1,400 rehab centers, filed for bankruptcy in July.

Signed by Senators Elizabeth Warren, Peter Welch, Richard Blumenthal, and Congresswoman Maggie Goodlander, the letter alleges that Genesis’ financial collapse stems from years of private equity extraction, beginning with JER Partners’ 2007 purchase, which included sale-leaseback deals that left Genesis saddled with high rents and long-term debt.

The legislators accuse the company’s more recent private equity owner, ReGen Healthcare – controlled by Joel Landau and backed by Pinta Capital Partners – of further degrading operations.

“This precarious situation appears to have been the result of years of private equity looting of Genesis, including by JER Partners and, most recently, by Mr. Landau’s ReGen Healthcare,” the letter dated Oct. 7 stated. “We are further concerned that Genesis and Mr. Landau may be using the bankruptcy system to wipe away Genesis’s debts and claims to victims by selling the company at a discount to insiders.”

Genesis accepted a $100 million investment over two years from Landau’s private equity firm in 2021 in exchange for a 93% equity stake and the right to appoint two board members – ReGen acquired the right to appoint an additional board member in 2023 in exchange for an additional $25 million.

“The circumstances of this buyout were unusual in their own right. A Senate investigation revealed that the company plunged into financial failure,” the letter noted.

Despite receiving over $665 million in pandemic-related government aid, Genesis reportedly continued to deliver substandard care and rack up patient abuse, neglect, and safety violations, the letter stated.

Since ReGen’s takeover, lawmakers cited declining CMS ratings, facility closures, legal liabilities, and over $344 million in estimated claims from patients and families.

The letter also questions whether Genesis and its private equity backers are abusing the bankruptcy process to wipe away debt and shield insiders from accountability. Specifically, Genesis filed a “stalking horse” bid – where ReGen has agreed to buy the company’s assets at a discount. Lawmakers are concerned this deal may leave victims, vendors, workers, and unsecured creditors with little or no recovery, while insiders receive legal releases and retain control of the company.

Stalking horse bids from insiders can reduce creditor recoveries, bypass fair market competition, and include protections like superpriority status and breakup fees, the lawmakers noted. These deals often discourage other bidders, and may let insiders shed debt without paying fair value, the letter stated.

The lawmakers also expressed alarm over the possibility that Genesis may have deliberately chosen to file in the Northern District of Texas due to its favorable stance on insider protections. They likened the Genesis situation to the Corizon Health bankruptcy, in which another private equity investor, Perigrove, used controversial tactics to avoid liabilities.

David Gefner, a director at Pinta Capital Partners, is also co-founder of Perigrove.

“Mr. Landau’s connection to Perigrove through Pinta Partners raises concerns that Genesis could be attempting to repeat Corizon’s playbook – this time using a stalking horse bid rather than the Texas Two-Step – in order to avoid claims and liabilities. The hundreds of victims of Genesis’s mismanagement deserve better,” the letter said.

To investigate further, the lawmakers are requesting detailed information by Oct. 21, including Genesis’s financials, leadership structure, insider compensation, bankruptcy rationale, and plans for patient care and employee protection. They also want to know how much victims, workers, and unsecured creditors are expected to recover from the proposed sale.