On March 2, 2022, Judge M. James Lorenz, of the United States District Court of Southern California, declined to exercise Borrego Health’s request for supplemental jurisdiction over state law claims in the Borrego Community Health Foundation v. Inland Valley Investments LLC; Promenade Square LLC; DRP Holdings LLC. All are owned by Daryl Priest.

The court also accepted Priest’s requests for dismissal of the RICO claims with leave for Borrego attorneys to amend.

According to Dan Kramer, publicist for Borrego Health, “The case is still pending a decision on the Motion to Dismiss. Regardless of the outcome of this motion, Borrego Health will continue to litigate the matter for redress of the fraudulent conduct alleged against Defendants.”

Specifically, Borrego Directors asked the court to step in and provide relief between the state’s demand to stop paying inflated and illegal market rental rates on three properties owned by Daryl Priest. Priest refused to comply. Borrego Health argued that the current board of directors was being forced by the state to pay fair market value rent, and the defendant, Daryl Priest, landlord, refused to comply by lowering the illegal rental fees. And to show he was serious; Priest’s attorneys filed a counter complaint.

This placed the Foundation’s operation of three clinics in jeopardy. The clinics in question are located in El Cajon, Barstow, and San Bernardino. Caught between two forces over which they claimed to have no power, Borrego Health asked the court to intervene with a number of proposed actions, including removing Borrego Health from the center of the cause, and letting the state Department of Health Care Services (DHCS) and Priest settle the rental issue.

The court declined Borrego Health’s requests to intervene with the state.

DHCS Communications Director, Anthony Cava, was asked about the case, since the Department had been named a defendant by Borrego Health for its role in demanding Borrego Health immediately cease and desist paying Priest’s inflated rental fees or be punished.

Not surprisingly, the DHCS’ response was, “DHCS declines to comment on pending litigation and advises that the involved parties to the litigation be contacted for further information.”

In fact, legal commentators believed the Judge would dismiss the entire civil action because Borrego Health itself had actively conspired with defendants to undermine the statutes, in this case, paying inflated rents.

According to dental fraud expert, Dr. Michael Davis, “It’s not typical fraud if both parties willingly accepted what obviously was inflated rental fees. In fact, it’s money laundering in a far larger scheme.

“For Borrego Health’s CEO & COO & CFO not to have a due diligence examination, in square foot rental comps, represents internal corporate officer malfeasance. It’s a lot of money. Their duty to their nonprofit FQHC would have been to examine the local market for rental spaces, and comparable spaces & rental costs,” he added.

Having a new CEO and board of trustees, does not absolve Borrego Health of the past illegal actions. Furthermore, Sandra Hansberger, the current chair of the board and member Dan Anderson (past chairman) were sitting board members and participants in decisions made by the now deceased, previous CEO, Bruce Hebets and his heir-apparent Mikia Wallis.

This is only one of many FQHC federal and state regulations Borrego Health was, and is still violating. These include salaries and benefits beyond average FQHC non-profit averages, failure to disclose critical conflicts of interest and inflated rent payments to former Board Chairman Anderson, and purposely withholding information required by the IRS.

The court, at the same time, granted Priest’s motion to dismiss the Racketeer Influenced and Corrupt Organizations (RICO) Claim with leave for Borrego Health attorneys to amend what the court found as insufficiencies to warrant raising the right of relief above the speculative levels.

At issue is the repayment of $11.5 million Borrego Health overpaid to Priest in inflated rent. Borrego Health under RICO is demanding that damages of $11.5 be tripled to $34.5 million and paid to BCHF.

The Judge stated, “A pleading that offers ‘labels, and conclusions’ or a formulaic recitation of the elements for a cause of action will not do.”

In his conclusion, Judge Lorenz gave Borrego Health until March 22, 2020, to file an amended RICO complaint.

“Defendants at that time shall have the time set forth under Federal Rule of Civil Procedure 15 to file a response.”

The Judge added, “BCHF should consider all the arguments raised in the Defendants’ motion to dismiss when amending its allegations.”

Reading between the lines in Kramer’s response to the question of whether Borrego Health intended to amend the RICO charges as allowed by the Judge, it appears that the Foundation is not going to respond and is waiting for the case’s final dismissal.

Dr. Michael Davis, a dentist, and contributor to dental trade publications, including Dentistry Today, is one the country’s leading experts on dental fraud and has served as an expert witness in some of the nation’s largest cases. He continues to be on call to explain the complexities of dental fraud and systematic corruption for judges and juries involved in these types of cases.

Davis believes 100 percent the RICO violations occurred.

I also believe Borrego Health was complicit and is NOT the party to bring forth those charges. The state and federal government should bring those charges.

“Private civil RICO allegations are very difficult to prove. If it were a government criminal or civil prosecution, prosecutors would have the resources to squeeze low level players in the conspiracy and generate witnesses and their affidavits.

“I don’t think much of a RICO violation charge in a civil case, in which both parties (defendants and plaintiffs) participated. It all seems like a smokescreen to somehow absolve Borrego Health and save it from possible dissolution or acquisition by another nonprofit group, which is more probable and may likely happen,” Davis added.

With the case being dismissed as it applies to relief from the Court from BCHF’s rental dilemma, Kramer stated, “Following the landlord’s refusal to modify lease terms, Borrego Health’s D Street Medical Center and Barstow Community Health Center locations were closed. These closures were publicly announced on December 3, 2021, with an effective date of February 1, 2022.”

“Centro Medico El Cajon remains open. We supported D Street and Barstow patients in transitioning to other convenient care options with nearby Borrego Health locations as well as other local FQHC organizations.”

Priest’s attorney declined to comment.