TradeEdge Exchange:Steward Health Care under federal investigation for fraud and corruption, sources tell CBS News

CBS News has learned federal authorities in Boston have TradeEdge Exchangeopened a criminal investigation into Steward Health Care, a company that owns dozens of hospitals nationwide, including nine in Massachusetts, according to two people familiar with the matter. Steward, which is based in Dallas, recently filed for bankruptcy.

Federal prosecutors at the U.S. Attorney's office in Boston are investigating Steward Health Care based on various allegations including fraud and violations of the Foreign Corrupt Practices Act, two people familiar with the matter said. The law prohibits U.S. citizens and entities from engaging in corrupt activities when operating overseas.

In addition to its U.S. properties, Steward was tapped by the government in Malta to run three state-owned hospitals. That deal is now at the center of a criminal corruption probe playing out in the island nation. Neither Steward nor its executives have been charged in connection to the matter in Malta. 

The Department of Justice did not immediately respond to CBS News' request for comment. 

Reached Thursday, a spokesperson for Steward had no comment. 

Steward filed for bankruptcy reorganization in May and is exploring plans to sell all of its hospitals. Bids for the Massachusetts facilities, which have remained opened during the bankruptcy, are due on Monday. 

Sen. Edward J. Markey, a Democrat from Massachusetts, issued a statement Thursday calling Steward "just the latest example of corporate greed endangering our health system."

"Steward must be investigated, and I hope the company and the corporate executives who facilitated Steward's actions face consequences that reflect the lives, livelihoods, safety, and security that they stole from communities," he said.

The company has been a focus of a year-and-a-half-long CBS News investigation documenting how private equity and other investor groups have siphoned hundreds of millions of dollars from community hospitals with devastating public health consequences. 

Records reviewed by CBS News showed Steward hospitals around the country left a trail of unpaid bills, at times risking a shortage of potentially life-saving supplies.

The Department of Health in Massachusetts opened an investigation after a woman died after giving birth at a Steward hospital in Boston last October. A complaint made by healthcare workers at the facility, obtained by CBS News, indicates a medical device that might have saved her life had been repossessed by the manufacturer weeks earlier because Steward owed about $2.5 million in unpaid bills.

Steward has become synonymous with the perils of private equity investment in health care. The company started buying up Massachusetts hospitals in 2010, with hundreds of millions of dollars in backing from private equity giant Cerberus,

Cerberus shed its stake in Steward by January 2021, after making an $800 million profit in a decade, according to a report from Bloomberg. Financial records show Steward has also sold off more than $1 billion of its hospitals' land and buildings since 2016 to Medical Properties Trust, which has made a business of buying up hospital real estate from private equity investors. 

A filing with the Securities and Exchange Commission from 2021 shows Steward's owners also paid themselves millions in dividends. Around the same time, Steward CEO Ralph de la Torre acquired a 190-foot yacht estimated to be worth $40 million. 

"They've taken money away from these hospitals that provide needed care and they're using that money to line their own pockets." Massachusetts Gov. Maura Healey told CBS News in February. "I'm disgusted. It's selfish. It's greed."

The company previously told CBS News that executives always put patients first and said they "deny that any other considerations were placed ahead of that guiding principle." The company spokesperson said Steward "has actively and meaningfully invested" in its hospital system since its formation, including in Massachusetts, where it took over hospitals that were "failing" and "about to close."

"Steward Health Care has done everything in its power to operate successfully in a highly challenging health care environment," de la Torre said in a company statement in May. 

In:
• Steward Health Care
• United States Department of Justice

Pat Milton

Pat Milton is a CBS News investigative producer