Figure in probe runs $20 million foundation

Investor at center of hospital inquiry

September 05, 2004|By Crystal Yednak and Jane Fritsch, Tribune staff reporters. Tribune staff reporters Bruce Japsen and Ray Gibson contributed to this report.

Stuart Levine, the political appointee at the center of a federal investigation into hospital construction in Illinois, moves easily in the territory of the rich and the connected.

Entrepreneur, investor and friend of the powerful, he amassed a fortune in the HMO business and has since given away millions of dollars, assuring his standing in a world where money opens doors to social and political success.

But much of the money he has given away in recent years was not his own, Internal Revenue Service records show. It belonged to a $20-million non-profit foundation Levine gained control of five years ago.

Levine also used $1.5 million of the foundation's money to invest in a Florida real-estate venture involving his relatives and business partner, Robert Weinstein, who is on the foundation's board along with Levine, the records show.

The IRS frowns on the use of a non-profit foundation's money for the financial gain of the people who run it.

Records also show that $6 million of the foundation's money apparently is no longer in its accounts. It was designated for scholarships at a North Chicago medical school, on whose board Levine and Weinstein served. School officials said they did not get the money and declined to explain what happened to it.

Neither Levine nor Weinstein returned telephone calls.

Financial maneuvers at the school, the Rosalind Franklin University of Medicine and Science, are just one strand in the complex business affairs of the 58-year-old Levine, who had become accustomed to working the levers of power from behind the scenes, whether on the board of a state agency, a university or even Lincoln Park Zoo.

He was abruptly thrust into the news in June because of a federal whistleblower investigation into allegations of extortion in hospital construction in Illinois. Levine resigned as vice chairman of the Illinois Health Facilities Planning Board, the state panel that decides whether hospitals and clinics can be built or expanded.

Officials of Edward Hospital in Naperville had alleged that Levine participated in an attempt to pressure them to hire a Deerfield construction company or risk state denial of their plans for a new hospital.

Levine also has resigned from the board of the Illinois Teachers' Retirement System, one of the government panels he had been appointed to over the years while donating almost $2 million to state and federal political candidates.

The Rosalind Franklin medical school has also been drawn into the news because of its connections with Levine and because of a federal grand jury subpoena for its financial records. It is not known precisely what records the grand jury is seeking.

Levine resigned as chairman of the 12-member board of the medical school in June. Weinstein resigned last week, along with all but one of the remaining board members.

Among those who resigned was Mel Rosenberg, an accountant who also was on the board of the scholarship foundation. Records show that a relative of Rosenberg's was involved in the Florida real-estate investment. Rosenberg declined to discuss the matter and said that he had "nothing to do with the distribution" of the $6 million.

K. Michael Welch, the president of the school, recently declined to explain the reason for the mass resignation, saying only that the school was "moving forward."

In July, Welch acknowledged that the school had received a federal grand jury subpoena. He said federal agents had told him "that we are possibly the victims of fraud."

On Thursday, Welch declined to answer questions about the activities of the scholarship foundation, called the Northshore Supporting Organization.

"We can't talk about that," Welch said. "You have to understand that as a result of the subpoena that we have, a lot of our documents are with the FBI."

The school had "no record of ever receiving $6 million cash from this foundation," Welch added. "Let's leave it at that."

Personal highs, financial lows

The inquiries come at a time of personal triumphs and financial reversals for Levine.

In April, President Bush appointed him to the board of the United States Holocaust Memorial Museum. He also was elected to the board of the new Lincoln Presidential Library in Springfield. Last fall, he was named man of the year by a Jewish organization and was honored at an elaborate dinner as a great donor to charitable causes.

But a biotech venture he founded several years ago is foundering, unable to bring its only federally approved drug to market. Levine and Weinstein are major shareholders in the venture, San Diego-based Imcor Pharmaceutical. Formerly called Photogen, the company has lost tens of millions of dollars in share value in the last two years and has been removed from the Nasdaq stock market. It now trades over the counter for less than 50 cents a share.

The company has been unable to raise enough money to begin selling its cardiac-imaging drug called Imagent.