The Steward Adversary Complaint: A Case Study in Corporate Looting Disguised as Healthcare Leadership
- Christin Deacon
- Jul 21
- 7 min read
Leonardo DiCaprio might want to start growing a goatee and brushing up on healthcare jargon, because if there’s ever a sequel to The Wolf of Wall Street, it just might be called The Doctor of Dallas. The script is already written—featuring a cardiac surgeon turned healthcare mogul who allegedly siphons hundreds of millions from a crumbling hospital empire, buys a superyacht and a private ranch, and leaves a trail of creditors, unpaid vendors, and patients in his wake. This time, though, the action doesn’t unfold on a Manhattan trading floor—it’s playing out in Bankruptcy Court in Houston.
In the annals of American healthcare collapses, the bankruptcy of Steward Health Care may ultimately be remembered not for the services lost, but for the breathtaking scale of alleged corporate misconduct that preceded it. The recently filed adversary complaint in the Steward Health bankruptcy case is not just a legal action; it is a 68-page indictment of a broken system where insiders siphoned off hundreds of millions while patients, providers, and creditors were left to pick up the pieces.
This article unpacks the core legal theories, transaction structures, and factual allegations that underpin this damning adversary proceeding. It also explains what an adversary proceeding is, how this case fits into the broader Chapter 11 landscape, and why it may come to define how courts view insider control and private equity-style extraction in distressed healthcare systems.
What Is an Adversary Proceeding?
In bankruptcy, an adversary proceeding functions like a full-scale civil lawsuit filed within the broader umbrella of a Chapter 11 case. Unlike routine motions or claim objections, adversary proceedings involve formal pleadings, discovery, trial proceedings, and often complex legal claims — including fraudulent transfer, breach of fiduciary duty, and veil-piercing.
In this case, Steward Health Care System LLC and its affiliated debtors filed an adversary proceeding against more than a dozen defendants: former CEO Ralph de la Torre, several other Steward executives and directors, and a constellation of entities allegedly controlled by or affiliated with those insiders — including, notably, Tenet Healthcare Corporation.
Central Allegation: Corporate Sabotage by Design
The adversary complaint makes one core allegation: that de la Torre and his inner circle knowingly operated Steward while insolvent in order to extract as much personal wealth as possible through a series of insider transactions. These included:
A $111 million dividend to insiders (with de la Torre personally pocketing over $81 million)
A $1.1 billion hospital acquisition from Tenet that allegedly lacked financial rationale
A diversion of over $130 million in equity proceeds from the sale of value-based care assets to entities controlled by the insiders themselves
Each of these transactions, plaintiffs argue, was orchestrated not just in bad faith but with deliberate efforts to bypass governance controls, conceal information from independent directors, and hinder creditors.
The $111 Million Dividend: When the House Was Already on Fire
In January 2021 — at a time when Steward's liabilities exceeded assets by more than $1.5 billion — de la Torre and a few board insiders executed what the complaint calls a "raid of company cash." The $111 million dividend was issued without board approval, through a stealth restructuring of LLC governance rules that gave de la Torre unilateral power to authorize distributions.
De la Torre received $81.5 million. Within months, he bought a $30 million yacht. Others on the board received multimillion-dollar windfalls. Meanwhile, the company’s financials were deteriorating so rapidly that the bankruptcy filing just a few years later was already under serious internal discussion.
The complaint describes a calculated effort to unfreeze distributions that had previously been blocked by Cerberus Capital — Steward’s private equity backer — and to silence in-house counsel who raised alarms. In a telling internal email, one Steward executive wrote: “UFB, even for him.” Another MPT executive, eager to greenlight the payout, cheered that de la Torre was finally “free at last … [to] take a well-deserved distribution.”
By restructuring ownership layers and executing a cascade of consent documents, de la Torre bypassed the board and routed funds directly into insider pockets. The complaint seeks to claw back the funds as both actual and constructive fraudulent transfers.
The Tenet Transaction: Empire Building at Creditor Expense
In mid-2021, Steward acquired five hospitals from Tenet for $1.1 billion. The complaint alleges this acquisition made no economic sense. The company was already insolvent. It lacked the liquidity to close without selling assets elsewhere. And, crucially, the price was inflated well above internal valuations.
To fund the deal, Steward entered another sale-leaseback with Medical Properties Trust (MPT), pledging its own hospital real estate to raise quick capital. The plan had been to fund the acquisition through the sale of Steward’s Utah hospitals to HCA — a transaction later blocked by the FTC. The Tenet deal went through anyway, and when the Utah sale fell apart, Steward’s financial position became irreparably strained.
Years later, bids for the same Miami-area hospitals that Steward purchased from Tenet came in at between $0 and $10 million.
The CareMax Transaction: Self-Dealing in Broad Daylight
Perhaps the most egregious transaction came in 2022, when Steward sold its value-based care business to CareMax. Rather than direct the equity proceeds back to the operating entity (SHC Network), de la Torre and his allies set up a pass-through entity (Sparta) to receive the CareMax shares. SHC Network got $60.5 million in cash. But over $130 million in CareMax stock went to a holding company owned by the same insiders who orchestrated the deal.
One of the insiders who approved the transaction was simultaneously a director of SHC Network and a beneficiary of the diverted stock. No board member recused themselves from voting, despite knowing the company was insolvent.
The plaintiffs call this what it was: a fraudulent transfer designed to enrich decision-makers at the direct expense of creditors and the corporate entity.
Legal Theories: Fraud in a Lab Coat
The legal arguments laid out in this complaint don’t just read like a bankruptcy treatise — they read like the script for a financial thriller.
At the heart of this case are the laws designed to prevent exactly this kind of brazen behavior — and they’re not obscure or arcane. In fact, they’re the basic building blocks of justice in any corporate collapse.
Let’s start with fraudulent transfer — the idea that you can’t give away your company’s assets when you’re already broke. That applies whether you hand your yacht-funding dividend to a friend, a shell company, or yourself. In legal terms, these transfers are either made with intent to hinder or defraud creditors (actual fraud), or made while insolvent and without receiving fair value in return (constructive fraud). The $111 million dividend, the inflated Tenet deal, and the insider stock grab in the CareMax sale? All classic examples.
Then there’s breach of fiduciary duty — the concept that directors and officers must act with care, loyalty, and good faith. Here, the insiders didn’t just sleep at the wheel. They allegedly set the GPS for the nearest bank, ran over internal legal counsel, and looted the trunk before jumping out with parachutes stitched from legal indemnities.
The complaint also alleges tortious interference, claiming that de la Torre willfully sabotaged Steward’s operating agreements — rewriting the rules of governance mid-game to allow his payday to pass unchallenged.
And because no healthcare noir would be complete without the corporate costume changes, the debtors are demanding veil-piercing — a way of holding de la Torre and others personally liable by showing that their “companies” were nothing more than alter egos. If the yacht-holding company is just a floating wallet and the ranch-holding LLC is a glorified FedEx address, the law says: no more hiding.
Finally, the complaint goes full circle with claims of unjust enrichment — a legal way of saying, “You shouldn’t get to keep what you stole.”
So yes, this case is about hospitals and governance and insolvency. But it’s also about common sense. You can’t drain a company dry, fly the cash to the Cayman Islands, buy a boat, and call it leadership.
The Accomplices: Who Looked the Other Way While Steward Burned?
The insiders may have driven the getaway car, but they didn’t pull this off alone. At nearly every point, someone with real authority — or at least real data — had an opportunity to intervene. Tenet Healthcare sold five hospitals to Steward for $1.1 billion, to a buyer whose insolvency was no secret. CareMax handed $130 million in equity to a shell company owned by the very insiders orchestrating the deal. UnitedHealthcare, Aetna, Blue Cross Blue Shield, and Cigna all maintained contracts with Steward and continued sending members and dollars to its hospitals, despite rising red flags in claims data, solvency, and quality performance. These payers saw the trends. They had full visibility into reimbursement patterns, utilization spikes, and abnormal cost-to-care ratios — and said nothing. Independent directors rubber-stamped deals without recusal. Auditors, transactional counsel, and bankers let the paper flow. And regulators — including CMS, the Texas Health and Human Services Commission, and state departments of health in Massachusetts, Florida, and Arizona — kept licenses active, payments flowing, and oversight on mute.
Everyone had something to lose by disrupting the illusion. Carriers didn’t want to displace large swaths of their provider networks or acknowledge that their contracted hospital system was financially collapsing. Regulators faced political blowback and public health consequences if major hospitals shut down. State agencies avoided triggering accountability they weren’t prepared to enforce. Even CMS — the single largest payer to Steward hospitals — continued reimbursing claims with taxpayer dollars, despite warning signs in financial filings and cost reports. No one wanted to be the one to pull the plug. So they didn’t. Steward insiders got their cash, their yacht, and their exit. The rest got silence, chaos, and a multi-billion-dollar hole in the American hospital system.
What Comes Next?
This case is still in its early stages, but it is one of the most aggressive and factually detailed insider litigation efforts to emerge from a healthcare bankruptcy in recent memory. The adversary proceeding sets the stage for discovery, depositions, and potentially years of litigation unless settled. It may also prompt regulatory interest in how these transactions were permitted — and who else looked the other way.
But more broadly, the Steward case is a cautionary tale about concentrated power, opaque ownership structures, and what happens when hospitals are run more like hedge funds than healthcare providers.
As this adversary proceeding unfolds, I’ll be publishing a series of deep dives into each transaction, each shell entity, and each legal theory. Because while this case may be about Steward, the tactics deployed here are anything but unique.
