In Re Tehum Care Services, Inc. (f/k/a Corizon Health Services)
Corizon Health Services was one of the nation’s largest providers of correctional health care services in the United States. At one point, Corizon delivered health care to over 300,000 people incarcerated in state prisons and county jails across the country. But instead of providing good or even adequate care, Corizon chose to maximize profits by cutting corners. This caused many deaths, and many more preventable injuries and pain. After years of losing business, Corizon’s management decided to file for bankruptcy — but not because the company was truly bankrupt. Now the rights of hundreds — if not thousands — of currently and formerly incarcerated people who were harmed by Corizon are at risk. Together with leading civil rights organizations, we are fighting to protect the due process rights of these people.
As of 2018, over half of the nation’s jails have privatized health care, outsourcing it to third parties like Corizon. Since 2011, Corizon Health Services was one of the nation’s largest correctional health care service providers in the country. At one time Corizon delivered health care to over 300,000 people incarcerated in state prisons and county jails across the country. Corizon maximized profits by providing substandard care — and sometimes no care at all — exposing incarcerated people to risks of serious harm and death. Facing growing financial and legal consequences for its pattern of unlawful conduct, in 2023 Corizon carried out a scheme designed to help it escape as much as possible: the “Texas Two-Step.” Here’s how it works:
Corizon splits itself into two new corporate entities: Tehum Care Services Inc. (“Bad Co.”) and CHS TX (“Good Co.”). Under Texas corporate law, this move is known as a divisional merger. Next, Corizon dumps all of its outstanding liabilities plus one million dollars cash into Bad Co. Then it puts all assets — including employees, active contracts, real estate, equipment, and the rest of its cash — into Good Co.
Liability-filled Bad Co. declares bankruptcy. Meanwhile, the Good Co. entity — with all the assets — rebrands itself as YesCare and continues business as usual, free from its debt and liabilities.
With this manipulation of Texas corporate law and the bankruptcy process, Corizon is unfairly shielding its assets from creditors. Filing for bankruptcy has also allowed Corizon to essentially stop all lawsuits against it or against certain individuals or correctional agencies Corizon promised to indemnify before the bankruptcy. Those cases include an action against a former Corizon doctor who allegedly sexually assaulted at least six women in custody at Rikers, and multiple cases relating to in-custody deaths. Justice has ground to a halt for incarcerated and formerly incarcerated people harmed by Corizon, as well as other creditors.
Because many of Corizon’s creditors are incarcerated individuals, we joined this case to make sure the bankruptcy court understands the obstacles that are unique to them. We authored an amicus (“friend of the court”) brief to explain how the bankruptcy proceeding might impact incarcerated creditors’ due process rights, and how the court can preserve those rights. We also argued that the bankruptcy’s proposed financing arrangement would reduce, or even eliminate, incarcerated creditors’ ability to recover. We asked that the Court delay entering a final financing agreement until it was satisfied that it has complied with incarcerated creditors’ due process rights.