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Objection Correspondence 2006
to the DCA Sale

Objections to the approval of the purchase of DCA by Citigroup's CVC Asia Pacific were lodged with The Foreign Investment and Review Board (FIRB), Australian Stock Exchange, Australian Securities and Investment Commission (ASIC), and the Federal Department of Health and Aging. The emphasis differed but the general content was similar

Three months later I had heard nothing from them so I wrote again re-emphasizing the issues. Both letters are below.

27 September 2006
GPO Box 9848
QLD 4001

Dear Sir/Madam,

Objection to the granting or transfer of approved provider status for the nursing homes owned by Development Corporation of Australia (DCA) should it be purchased and controlled by CVC Asia Pacific or any other portion of Citigroup’s empire.

DCA has announced an agreement to a takeover by a consortium led by two Citigroup entities. This is subject to approval by all regulatory authorities. I submit that Citigroup is a criminal organization that has reached criminal and civil settlements totalling many billions of dollars. It and its predecessors have been involved in a series of scandals over a long period of time.

These Citigroup entities failed to meet probity standards for the operation of hospitals in 2005. Licenses were only granted after a long investigation, after a sale of the hospitals had been agreed to, and then only with conditions limiting its operations.

As indicated below nursing homes in Australia are at many times greater risk than hospitals, because of

  1. the absence of independent medical leverage,
  2. the vulnerability and lack of effective consumer power of residents and relatives
  3. the absence of any enforceable regulatory requirements in regard to the number and skills of staff,
  4. the parlous state of morale, apathy, skill and numbers of nursing staff and nurse managers in corporate homes,
  5. the recurrent demonstrated failures of the complaints, oversight and accreditation system,
  6. the lack of any evidence to suggest that recent changes will make any material difference for residents or staff
  7. the well documented lack of frankness and candour in the industry and in current politicians responsible for protecting citizens. As recently demonstrated they are unlikely to take any effective action unless more 90 year olds are raped and a public scandal brings the voting public to the table.

Standards of care in nursing homes are particularly at risk of increased financial pressures as corporations seek to squeeze out more profits. The advent of an influential controlling interest which markets itself as a turn around specialist is of great concern.

The majority of the problems in nursing homes have been a consequence of turning a community of loving and caring people looking after our seniors into an aggressive cost cutting market enterprise. In spite of its considerable resources there have already been problems in one of DCA’s nursing homes. The accreditation report has all of the indicators of a home where staff are disillusioned and demoralised, and where they are unable to get on site managers who will do what the company requires but their consciences challenge.

Citigroup has reached criminal pleas in the USA and been heavily fined. It has paid in the region of $10 billion in settlement of civil claims as a consequence of its role in setting up the worlds largest frauds - the Enron and Worldcom frauds. In addition to this it was a central player in a US $1.4 billion fraud involving misinformation and deceptive advice to thousands of investors. In Health care it was the banker and adviser to HealthSouth for the first 12 years of the 15 years during which HealthSouth perpetrated the US $4 billion systematic fraud on which its success was based.

Prior to its formation and since that time its predecessors and subsidiaries have been involved in scandal after scandal across the world and it is never far from any contentious financial dealings, ranging from money laundering, the support of multinational criminals in rogue states and many other activities.

I carried out a detailed study of the company and its operations in 2004 and the findings of that effort are available over several web pages at

I have not followed the company since that time but I am aware of articles linking it to the Wall Street bonds scandal, the Parmalat scandal and various problems in Japan and India. As a government body you will be in a better position to use the world’s data bases to research these problems than I am.

FIRB’s Citigroup failure in 2003
I have corresponded with the Foreign Investment and Review Board (FIRB) in regard to their track record in allowing what have subsequently been shown to have been severely dysfunctional companies into Australia - Tenet Healthcare (then NME) in 1991, Columbia/HCA in 1997, Sun Healthcare in 1997, HealthSouth in 1998. All have since departed largely due to the states unearthing the fraud and other unsavoury practices that characterised these companies and which FIRB chose to ignore.

FIRB has emphasized that it is only an advisory body and that the decisions are made by the deputy treasurer who is not required to take their advice. It may well be that decisions taken were contrary to this advice. FiRB does not release its advice under FOI.

States act to curb Citigroup
This occurred again in 2003 when Citigoup entities purchased Mayne’s hospitals..

Once again it fell to the states. NSW whose probity regulations are difficult to enforce legally does not have any restraint on the time it can spend on investigations.

  • For example Dr Amos the director general of health in NSW attempted to block the unconscionable Tenet Healthcare’s licenses in 1993 by delaying. The government responded by appointing a judge who had recently retired because his clandestine sexual activities rendered him at risk of improper influence to make the decision. He granted licenses over the advice of the department that the application be rejected. Subsequent revelations caused the federal government to withdraw support and push the company out of Australia.
  • In 2004 NSW Health carried out a thorough and prolonged investigation into Citigroup and its complex web of companies. It is clear that there were major concerns about the impact of Citigroup’s business practices and criminal tendencies . The department of health eventually granted licenses but these were subject to restricting conditions with which the company had to comply. I attach a letter from the department in which this is documented.

    It may be significant that the licenses were only granted after Citigroup (Affinity Health) had arranged to sell the hospitals to an Australian company. This was only 2 years after the purchase and not the 4 years which Affinity had earlier indicated. It is speculation but one wonders if NSW would have rejected the licenses had Affinity not sold the hospitals and whether this is what precipitated the sale.

    Possible Deception
    Most business press reports are based on company releases. It is significant that after exposure of the major Wall street frauds in 2000 the previously trumpeted close relationship between CVC Asia Pacific and Citigroup was seldom mentioned. When CVC Asia Pacific was founded its status as a full member of Citigroup was promoted. Not one of the hundreds of Australian press reports in the 18 months before and several months after the purchase of Mayne hospitals reported this, although the credentials of the others involved were explored.

    The 50% holding of CVC Capital partners in CVC Asia Pacific has been used to hide Citigroup’s role but the early claim that CVC Asia Pacific was part of Citigroup shows that CVC Capital Partners, their 50% founding partner (with Citibank) was considered to be a part of Citigroup. Whatever the legal formula is, for practical purposes CVC Capital partners is part of Citigroup.

    In 1993 US registered companies became subject to increased taxes and other restrictions in the UK. To overcome this these companies restructured and registered in the UK. The form used in CVC Capital partner’s case was some sort of Citicorp funded management buyout. Reports at the time indicated that this was to bring it into line with industry practices and did not signify a break from Citicorp. CVC Capital Partners has continued to act as the vehicle for Citigroup’s venture capital operations in Europe.

    These matters and the references on which the comments are based are documented at

    I am concerned that this important information for a provider of health care may have been deliberately suppressed and that FIRB and other government and regulatory agencies involved may not have known. I learned of it from the international press and from contacts in Canada. The AMA did not know. I must leave it to you to determine whether there was any lack of frankness and candour in required disclosures by the companies at that time.

    The vulnerability of the sector
    DCA has two arms, a radiology division and a large nursing home division. The radiology division carries the same risks of inappropriate commercial activities, and an adverse impact on care, as any of the vulnerable health care sectors.

    Aged care is a very different story. The residents of nursing homes are trusting, frail, elderly, mostly cognitively impaired, and many seriously demented. Their relatives are anxious and guilty about not being able to care for parents. In addition there is a major shortage and little prospect of their finding another home if they fall out with management by complaining. Relatives fear that if they complain the resident will be victimised.

    In other instances kindly nurses struggle desperately to cope with an impossible work load in understaffed facilities. They will be blamed by management if residents or their families complain. The families desist out of loyalty. In addition to this relatives are out of their depth and unsure of themselves. In many instances the response of the sort of management which has emerged in a severely dysfunctional system has been to discredit and attack the complaining family as dysfunctional. Several instances are documented.

    In the health care marketplace vulnerable people are protected by the medical profession who have a duty of care and who are also interested in maintaining high standards to maintain professional status. They control the referral of patients and so the income of the hospitals. They exert considerable leverage so are in a position to insist of adequate standards,

  • Example:- After the appointment of Peter Smedley as CEO, Mayne’s hospital group adopted a policy of cherry picking so discriminating against the less profitable but seriously ill requiring hospitalisation. In addition the hospital was organized along business lines not directed to care. These intruded adversely into care. The doctors took their patients elsewhere, Mayne’s profits collapsed and the hospitals were sold. When Affinity bought the hospitals they went out of their way to keep the doctors on side and there were no scandals.
  • Doctors play very little part in the running of nursing homes and in caring for residents. They have no control over referrals, have no leverage and exert little influence. Nurses are employees and also exert little influence. Those who complain are ignored. Those who blow the whistle are discredited and fired. In addition to this the standard of care is directly related to the amount of nursing time and level of skill of the nurses. Nursing fees comprise over half the costs and any attempt at increasing productivity or efficiency in nursing homes always impacts on nurses and so care. CVC Asia Pacific markets itself as a turnaround expert,

    The nursing home sector is consequently many times more vulnerable to inappropriate commercial pressures than hospitals. That this is so is illustrated by the increasing frequency of scandalous findings in nursing homes in Australia and the increased seriousness of the problems.

    The parlous state of our nursing homes
    I have almost completed a study of the nursing home sector and this will appear on the www soon.

    What is abundantly clear is that there has been a steady deterioration in the nursing home sector since the sector was turned into a competitive market in 1997. All regulatory requirements related to staffing and accountability were lifted. The principle offenders have been commercial operators, many of them in Victoria where commercial operators were encouraged in the early 1990s.

    The consequences were first dramatically exposed in a scandal at Riverside only 3 years later and since then exposures have been recurrent culminating in a series of rapes and sexual abuses in a few homes across the country.

    The accreditation agency and the complaints mechanisms have been singularly ineffective and even when major problems have been identified they have been tardy in acting. The majority of the scandals are exposed by nurse and sometimes family whistle blowers,

    These recurrent and ongoing failures are despite promises and repeated attempts to fix the system, There is no reason to expect the recent bout of changes and promises by the minister will be any more effective than those made by his predecessors in 2000 and subsequently. All made similar claims. They made no difference.

    The minister has done no more than tighten up the regulatory and oversight processes and increase the onerous impositions. He has done nothing to address the major problems of apathy, disinterest and demoralization, particularly prevalent in the commercial sector.

    Central to these problems is the demoralisation consequent on devaluing skill, dedication, altruism and real care. This has been replaced by an excess emphasis on process, costs and profitability.

    With the removal of all regulatory requirements regarding staffing the commercial response has been to deskill and under staff. Skilled staff and motivated nurse managers have been replaced. Dedicated and genuinely motivated staff have found the "wrinkle ranching" intolerable. They have left the sector in droves. Those who were prepared to do what the company managers dictated were inappropriately promoted into positions further alienating nurses. To fill the shortages untrained and disinterested people were taken in off the streets, given minimal training and expected to provide care which required real skills.

    What has eventuated is an understaffed, over worked, unskilled, demoralised and apathetic work force and few recruits with an interest in working in the sector. The staff situation has become so bad that a few carers have raped and sexually abused the 90 year olds that motivated staff once cared for and loved. Worse still in one home staff observed this and did not take any action. In another a nurse manager did not see it as her responsibility to report it when her charges were raped. That such people could be part of this service is a clear pointer to what has happened. This is a clear pointer to fundamental problems in the sector and not an isolated event to be mentally quarantined.

    Instead of addressing the issues the minister has ignored the policies at the root of the problems. Nor has he indicated any willingness to make changes. Instead he has publicly committed to the same policies and market practices.

    The consequences of introducing an aggressive commercially focused multinational turn around expert into this apathetic and demoralised mess is likely to be disastrous.

    Deception and dishonesty in government and the industry
    This government has shown a remarkable ability to fudge the truth and dare I say it lie. There are the children overboard, the deceptive and dishonest misinformation about Iraq, and more recently the proximity and likely deliberate blindness to the AWB kickbacks.

    As disturbing is the misinformation given by the prime minister, the minister and the industry (see 6 page "special advertising report in the Weekend Australian on 23 September). That there would be problems from governments policies was predicted. That the scandals are symptomatic of problems that are deeply rooted and systemic is undoubted. That government policies have been a major contributor is clear. The regulatory mechanism, like that in the USA is ineffective and unable to counter the commercial pressures. They were told that it was unlikely to work and it still will not work.

    In spite of this these politicians and the industry have continued to claim that the scandals are isolated events at a very few homes, that the system is one of the best in the world, and that the regulatory system is effective and one of the tightest in the world. Nothing could be more dishonest. Their claims are a disservice to the public and families placing elderly members in nursing homes. Their welfare will depend on the families being fully aware of the situation and providing close supervision and oversight..

    The likelihood of the government or the industry confronting and addressing any serious problems if CVC Asia Pacific’s practices impact on care is remote. This would be embarrassing and will consequently receive the same lack of attention accorded to AWB.

    There will consequently be no effective restraint on Citigroup a powerful multinational with a track record of fraud, facilitating fraud, and of dealing deceptively with those whose interests it claimed to serve.

    In support of my objection I include copies of

    1. My undated submission in support of an objection to the transfer of licenses to Affinity Health care in November 2003. Note that this preceded my detailed study in 2004.
    2. Letter from NSW Health dated May 27, 2005 documenting their investigation.
    3. Critical Review of an accreditation report into a DCA nursing home revealing the sort of problems I refer to here. DCA rushed staff to the home to ensure that the problems were fixed before there was publicity. It is likely to be a pointer to the future.

    In addition I would be grateful if

    1. You would consider the web page and the links supporting it as supporting documentation for this objection. If you are unwilling to use the web as a resource I am willing to print them and send.
    2. Please would you liaise with the health department in NSW and carefully consider their findings and reasons for their restrictions on licenses in the light of the far greater vulnerability of nursing homes and the risks posed by the parlous situation that exists.

    Please be kind enough to acknowledge this objection and confirm that you will accept the web link as part of my submission. .

    Yours sincerely,


    If your office covers only approval for Queensland nursing homes then I would be grateful if you would immediately forward copies to other state and federal offices or alternately advise me of their addresses.

    Some weeks later I phoned the Queensland office and was assured I would hear within weeks. Three months after I had lodged my objection newspapers reported that the sale had gone through. I wrote again stressing the issues and asking for a response.

    8 January 2007
    GPO Box 9848
    QLD 4001

    Dear Sir/Madam,

    Objection to the granting or transfer of approved provider status for the nursing homes purchased from Development Corporation of Australia (DCA) and controlled by Citigroup’s CVC Asia Pacific.

    I refer you to my objection dated 27 September 2006 which has not yet been officially acknowledged.

    I note that the sale of DCA to the Citigroup conglomerate was reluctantly approved by shareholders, many of whom had reservations. They were given little option when management elected to join with the Citigroup subsidiary in the buyout.

    The transaction has been approved by the courts.

    Your decision
    By now you will have consulted with NSW authorities in regard to the exhaustive investigation which led them to place restrictions on hospital licenses. You will have checked on the accuracy of the information supplied at

    Citigroup owner of CVC
    I remind you that although Citigroup is claimed to be only a 50% partner in CVC the other partner is CVC Capital Partners which operates as CVC’s European equity arm and is only separated from Citigroup by a technical arrangement in order to meet European regulations. For practical purposes it is part of Citigroup.

    As you will have noted Citigroup is heavily involved in health care financing and management in the USA. It has a health care division, organises health corporate conferences and advises on the business of health care. It has been closely associated with some of the companies that have committed fraud and misused the system; particularly with HealthSouth, a company which admits it committed a $US4 billion fraud.

    The US health and aged care system is not only riddled with fraud but is ruthless and inhumane. Companies advised by US financiers have defrauded the system and exploited the weak and vulnerable - particularly the aged.

    The problems with deliberate understaffing of nursing homes to maximise profit in the USA are even worse than in Australia. In that country the situation is so bad that citizen groups have banded together to litigate and demonstrate with documentation and witnesses the way many seniors have died from neglect due to deliberate understaffing in market focussed chains.

    Citigroup has a truly dreadful record for recurrent fraud and for assisting others in setting up frauds. Its record for deception is appalling. It has systematically deceived those whom it was required to serve by trading on its falsely claimed credibility to secure their trust. They were then deceptively advised and defrauded.

    CVC will be calling on Citigroup’s US expertise. The likelihood of regulatory restraint preventing this is remote, given Citigroup’s record for deception.

    Your decision
    I look forward to an early decision and your feedback/advice in this regard. I cannot believe that any responsible and independent body would let these people loose in our nursing homes.

    Yours sincerely,

     Click Here to return to the DCA purchase page and the response by the department if that page is not open.

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