Photographer: David Porter/Getty Images/iStockphoto

Corporate Murder Charge That Destroyed Company's Stock Is Now in Doubt

California indicted AAC Holdings after one patient died. A coroner contends it was natural causes, but nobody asked him.

AAC Holdings, a publicly traded chain of addiction treatment centers, saw its stock plummet last August after the company and its president were charged with second-degree murder in the death of a patient in California. Now AAC is asking for the case to be thrown out, citing a local coroner who appears to exonerate it.

It's highly unusual for prosecutors to charge an entire company for anything, let alone for murder. But that's what happened to AAC, which stands for American Addiction Centers. The chain gained national attention in 2014 when it became the first business focused solely on addiction treatment to go public. The company's shares tripled after its initial public offering. But then last summer, California charged it with murder and dependent adult abuse.

Two years earlier, the California Senate produced a report based on an investigation of four deaths at AAC facilities. One of the patients was Gary Benefield, 53, who was married with step-children and helped run a coal-operated power plant in Springerville, Ariz. 

Benefield was coughing and wheezing when he arrived at AAC’s A Better Tomorrow Treatment Centers facility in Murrieta, Calif., according to the report. It said his oxygen tank had been emptied at the airport due to airline regulations, and that AAC staff failed to get him a replacement despite a history of pulmonary disease and emphysema, and a recent hospitalization for pneumonia. Employees gave him an antidepressant and an anti-anxiety drug without a prescription and didn’t check on him throughout the night, the state found. Benefield died.

Following the report, a criminal probe was opened by the California attorney general's office, and an indictment was returned last July by a grand jury in Riverside County. AAC stock fell more than 39 percent.

In a motion to dismiss filed Jan. 22, AAC argues that in their haste to crack down on allegations of patient abuse, state prosecutors failed to investigate the Benefield case adequately. Specifically, the company points to a sworn declaration it obtained from Dr. Mark Fajardo, formerly the chief forensic pathologist in Riverside County and now the head medical examiner-coroner for Los Angeles County.

Fajardo said in a two-page statement that he performed the autopsy on Benefield in 2010 when he died, and that neither the absence of a special oxygen supply nor the administration of the psychotropic drugs contributed to his death. "It was my expert opinion at that time that the cause of death was hypertensive cardiovascular disease, with chronic obstructive pulmonary disease (COPD) as another significant condition," Fajardo said.

The coroner added that he'd never been contacted by the California attorney general's office and had been unaware of the criminal prosecution of AAC until last December.

Michael Cartwright, chairman and chief executive of AAC, said in a prepared statement that Fajardo's "testimony should have been heard by the grand jury." A spokeswoman for the California attorney general's office declined to comment.

AAC fell as low as $17.77 a share after the charges were made public last year. The motion to dismiss seems to have helped the stock, however, sending it up 17 percent since last week, to $19.48 on Wednesday.

 

Before it's here, it's on the Bloomberg Terminal. LEARN MORE