Monday Biz Briefing: Caterer fires Barnstable Brown Derby Gala as client

Welcome to the December 3 top secret, always confidential Monday Business Briefing.

These are biz tips Insider Louisville staff and contributors have collected during the past few days, a few of which are NOT double-verified like Insider Louisville’s daily reporting.

But as always, this is information from sources who are not just insiders, but who are players.

We’ve been accused lately of having way too many complicated business stories on banks, Medicaid managed care and tech start-ups. So, let’s lighten the mood a bit, shall we, with a preview to what could become an interesting Derby story.

• We got a heads-up from multiple sources that businesses may be backing away slowly from the big Barnstable Brown Gala. Earlier this week, Ladyfingers Catering cut its ties to the Barnstable Brown Gala after eight years.

Here’s the formal statement:

Ladyfingers Catering has chosen not to offer a contract to cater the Barnstable Brown Party this year, 2013, under the same policies and procedures of past years due to liability concerns. We have enjoyed working with the Barnstable Brown Charity and wish them continued success with a prosperous and safe event.

The word “liability” certainly caught our attention, and we tried to follow up on what’s going on. However, Ladyfingers owner and employees politely but firmly declined to comment. The contract has gone to Upper Crust Catering. (See screen shot at right.)

The Barstable Brown Gala used to be a Kentucky Derby draw for A-list stars such as James Earl Jones, Ronnie Wood, Stevie Nicks, Rod Stewart and Dennis Hopper. Until Ashton Kutcher came last year, the fundraiser had a decade of mostly Kid Rock-level B -list celebs. Whoever shows, the event is presented as a fundraiser for diabetes research. But, we started looking at the where the funding for the Barnstable Brown gala goes, and we found something of a disconnect.

A news release announcing Ashton Kutcher was coming stated the gala had donated $9 million to the Barnstable Brown Diabetes and Obesity Research Center since 2004.

The University of Kentucky, which operates the Barnstable Brown Kentucky Diabetes and Obesity Center, currently lists $1 million donated:

The agreement for the Barnstable Brown Kentucky Diabetes and Obesity Center makes the center the sole beneficiary of the Barnstable Brown Gala. The family has given $1 million for the center to date, with an additional $1 million pledged in the coming months. The family has also committed proceeds from the Gala for the next three years. Based on previous years, the family estimates the Gala will provide the center with $1.8 to $3 million over that three year period.

We tried several financial websites including GuideStar, but we could find no evidence the Barnstable Brown Foundation – the foundation listed in UK documents – has ever filed a Form 990, the financial statement the Internal Revenue Service requires of 501(c)(3) foundations to retain non-profit status. Form 990s document finances and distributions, as well as how much foundation officers are paid. The Barnstable Brown Foundation is not listed on the Kentucky Foundation Databook. Finally, there is no listing with the Kentucky Secretary of State. We’re assuming there is an umbrella entity that reports to the IRS, but we can’t find it. As we dug into this, one insider told us that back in the 1990s, Barnstable Brown celebs used to receive $5,000 Louis Vuitton travel bags and other swag that were purchased, NOT donated. Hotels always charged Barnstable Brown guests straight Derby rate, with no donations, the source said. “I never understood how all that worked.” Well, we’d like to hear an explanation.

• Okay, back to dull old finance and business. That said, this connects a lot of dots: The United States Department of Justice announced last month that Dayton, Ohio-based CareSource, one of the largest Medicaid managed care organizations in the United States, agreed to pay $26 million to settle a False Claims Act whistleblower lawsuit brought by former employees. When a source sent us this, we said, “So, what is CareSource?” The reply came back: “This is Humana’s strategic partner in Kentucky’s Region 3, where Passport Health Plan is now. CareSource will be the actual service provider, not Humana.”

Here’s a summary of CareSource’s settlement:

Two nurses who worked for CareSource assessing the medical and psychiatric needs of Children with Special Health Care Needs, charged that for five years, CareSource “knowingly failed to provide required screening, assessment, case management services, data submissions, data reconciliations and other case management-related requirements for child enrollees with special health care needs and for adults. In addition, Defendants subsequently submitted false data to the State of Ohio so that it appeared they were providing these required services, thereby allowing defendants to fraudulently retain the incentive portion of the capitation payments, and avoid penalties.”

Translated, CareSource defrauded the state of Ohio by ordering employees to claim payment for doing nothing.

From the settlement:

“We first talked to lawyers because we were being required to sign off on documents we knew were not true,” said Robin Herzog, who noted that both women felt that their nursing licenses were jeopardized because they were ordered to submit false information to the State of Ohio. Laura Rupert noted that “I told the company’s lawyer in August 2005 that we were made to submit data to the State of Ohio falsely showing that kids had been assessed for special needs. The settlement agreement shows that the false data continued to be turned in until at least the end of 2006,” said Rupert. Herzog and Rupert hope that their case will serve as a warning shot to Medicaid contractors across the country.

The case was filed back in 2006 under provisions of the federal False Claims Act which allows whistleblowers  to bring suit against government contractors and recover a portion of the proceeds in the event of success. As part of the deal, CareSource has entered into a “Corporate Integrity Agreement with the Department of Health and Human Services which requires the company to vigorously monitor its compliance with federal and state law and submit to enhanced scrutiny for a five-year period.” Meaning if the Beshear Administration’s plan to give Humana, WellCare and Coventry Health most of Passport’s Medicaid members goes forward January 1, at least the feds will be monitoring CareSource.

CareSource is the second insurer allowed to do business in Kentucky’s Medicaid mix after paying huge fraud fines to the feds.

This is from our July 6, 2011 post on Tampa-based WellCare Health Plan:

Federal authorities have been investigating WellCare for Medicaid fraud and securities violations since at least 2007. The company paid $80 million in penalties in 2009 under an agreement allowing WellCare to avoid criminal prosecution for conspiracy to commit health care fraud. In June 2010, WellCare executives agreed to a $137.5 million civil settlement with the Justice Department. The company also agreed to appointment of a third party to oversee WellCare’s compliance with state and federal regulations. Allegations include WellCare executives building market share by encouraging doctors and hospitals to over bill, with the increased costs passed on to Medicaid. WellCare executives also agreed to Securities and Exchange Commissions fines including a $10 million civil penalty related to more than $40 million in profits that WellCare didn’t pass on to Florida agencies from 2003 to 2007.

• Louisville-based fast food brand of brands Yum! Brands is the talk of the investing world after Yum! Brands shares dropped 10 percent – to $67.08 per share from $74.47 – by the end of Friday’s trading. Seeking Alpha, which does a pretty fair job of tracking Yum! Brands, attributed the drop to a company forecast that Q4 2012 same store sales in China are expected to fall by 4 percent after a 21-percent growth for the same period last year, with full-year 2012 growth coming at 6 percent. Good, but not great compared to the incredible success the company has had in China since 1999.  This year Yum! Brands opened 800 new units during the year and has another 700 store openings planned for 2013.  And think about that … not one local story about how a group of Taiwan-born Yum! Brands executives managed to open 4,000 (approaching 5,000 next year) stores – mostly KFCs – across China, which is a tightly regulated Communist (sort of) economy. Someone should rectify that … wait a minute, that would be IL. Until then, Yum! Brands took in about $10 billion in gross revenue for the first three quarters of the year on the way to about $12 billion for 2012.

• Downtown residential redevelopment is starting to pick up momentum. The big IL scoop this week was Melissa Chipman’s interview with Jeff Butler, who is redeveloping the former Progress Paint building at Brook and Market streets into retail and apartments. In that same vein, sources tell us there are developing plans to build a 200-unit apartment building somewhere along East Market Street. Sources say it’s the logical next step after NuLu has proven itself as a retail/restaurant corridor. Another building, the DeHart Paint and Coatings Building at 906 E. Main St., is in play, according to several interested parties. One of the stories on our “to-do” list is to calculate the number of downtown units from Fleur de Lis and Waterfront Park Place on Main up to The Harbison and down to the 800 Building, then over to The Henry Clay including all the buildings you never think of such as The Carlysle. The question is, are we getting sufficient density to attract the first big retailer?

• This is exciting. We got a tip on the IL Facebook page that the Hammerheads boys may be bringing that same sort of higher-end Germantown burger joint to the former Cycler Cafe/Cafe Aroma on Lexington Road near Jim Porter’s. We’re assigning this story to Steve Kaufman, our restaurant beat insider. Steve just doesn’t know it yet.
Hammerheads got big praise from Steve Coomes last year, though he was writing in Louisville mag:
It’s hard to imagine a place truer to the “neighborhood restaurant” concept than Hammerheads. Walkers ambling down Swan Street stop out front to chat and, if the picnic tables near the massive curbside smoker aren’t occupied, take a seat and grab a drink. Those who descend the front stairs into the below ground restaurant greet others with easy familiarity, perching at the long bar or captaining a table with an implied air of ownership.
To give you a mouthwatering preview, this was on the Hammerheads FB page late last week:
Our special appetizer is Bell’s Two Hearted Beer Cheese served with a delicious buttery pretzel croissant. Our special burger tonight is a fresh ground duck burger topped with a fried duck egg, served on fresh locally made focaccia bread with a jalapeño-sage aioli, mixed greens, and tomato. We have also just tapped New Albanian’s B15 Porter!
If Mssers. Burrus and Mucerino can bring Hammerhead quality food and great beer to the Highlands, that will put them in great company on a block which includes KT’s and August Moon. Looking forward to this ….

New solar arrays atop the Humana Building. (Click to see full size.)

Surprise! Actual briefs:

• ConAgra Foods bought Ralcorp Holdings Inc., the nation’s largest private-label food maker, for about $7 billion. Ralcorp has two facilities in Louisville including one on Westport Road and one near the University of Louisville.
• The University of Louisville is down to three nominees to replace College of Business Dean Charles Moyer, who retires next July.
• Speaking of U of L, it’s amazing how much taxpayer money flows to Louisville companies and firms through the university. For example, last summer, Power Creative and Red7e both got identical contracts for $250,000, according to university documents. The contracts run July 1 2012 through June 30 2013 for “support marketing and design efforts across the University, including development of marketing strategy, producing materials and supporting the advancement of the brand in each school.” That’s a lot of marketing ….

• With no publicity, Humana has installed solar on its Michael Graves-designed Main Street HQ. Humana’s newest array, made by San Jose, Calif.based SunPower, is now complete. The array – SunPower 327-watt modules and SMA inverters, confirm ours sources  – is connected to Louisville Gas & Electric’s utility grid. So, the thrifty insurance company/health care provider gets a check from LG&E every month to use to pay its own electric bill. The Humana building is on an aquifer system that heats and cools the building. Which may make the Humana building the Greenest office in town behind Gill Holland’s The Green Building in NuLu.