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.
More Top Picks Best Standing Desks For Kids
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.
Last year, Weinstein resigned from Imcor’s board of directors. Documents filed with the Securities and Exchange Commission show that as of April, Weinstein and his wife, Lois, held more than a million shares in Imcor.
Levine owns or controls more than 14.6 million shares, the records show.
The troubled stock also affected Levine’s personal charitable foundation, the Stuart and Sheri Levine Family Foundation. It held 100,000 shares of Photogen stock, according to IRS records.
Originally worth $2.1 million, the stock’s value had fallen to $48,000 by the end of 2002, the latest year for which records of the foundation are publicly available. The Levines put $364,000 of their own money into the foundation that year, leaving an ending balance of only $1,837, in addition to the value of the stock.
But Levine has been able to tap into another source of money since 1999, when he was put in charge of a $20 million fund set up from the proceeds of the sale of a chain of non-profit drug-treatment centers.
Levine had been on the board of directors of the treatment centers, called Interventions, when it was bought by Cornell Companies, a for-profit operator of prisons.
Whenever a non-profit company is turned into a for-profit venture, some amount of money must be set aside for charitable purposes. In this case, a $20 million settlement was arranged in negotiations with the Illinois attorney general’s office and the money was put in the newly created foundation.
Levine, a lawyer, helped work out the details of the sale and was given control of the new foundation, along with Weinstein, his business partner in a number of ventures, and Rosenberg, the accountant.
Donations rolled out
In the second year, Levine and Weinstein each got $85,000 from the new foundation, named IDDRS, in payment for what is described as 11 hours of work a week, according to a report filed with the IRS. Rosenberg was paid $35,000 for five hours a week.
Large donations went to a grab bag of causes that Levine and the others were interested in. All three were on the board of the medical school, and it got $680,000. Roosevelt University got $120,000, the Jewish United Fund got $620,000, and Lincoln Park Zoo got $180,000.
But within two years, Levine and the others had transferred nearly $18 million into yet another foundation they named Northshore Supporting Organization. Its sole purpose, according to IRS records, was to support a scholarship fund at the Chicago Medical School, which has since been renamed for Rosalind Franklin, a British researcher whose work helped lead to the discovery of the structure of DNA.
In the absence of any legal opposition, the directors of a foundation have wide latitude to change its purpose or beneficiaries, legal experts said.
School officials said they received about $350,000 from the foundation, but point out that they have no control over its operation, notwithstanding the fact that three of the school’s board members operated the foundation.
The Florida real estate deal involved an investment of $1.5 million of the foundation’s money in a Palm Beach County development called Lake Worth Gardens. Real estate records show that Levine and Weinstein organized a partnership that bought the senior citizens community for $6.8 million in 2002.
The estate of Levine’s late cousin, Theodore Tannenbaum, owned 90 percent of the investment, according to Florida records. The estate was managed by Levine and Weinstein. The records show that the other 10 percent was owned by Philip Rosenberg, a relative of Mel Rosenberg.
The Lake Worth Gardens investment was noted, with no explanation or disclosure of the insiders involved, on Northshore Supporting Organization’s tax return for the year ending June 30, 2003. No additional returns are publicly available.
Mysterious transaction
That same tax return lists a grant of “Notes Receivable” in the amount of $6 million to the medical school’s scholarship fund. No explanation is given.
The return also shows a drop of about the same amount in the foundation’s net assets, which fell to $11 million from $16.8 million. The only cash grant listed was $100,000 that went to the scholarship fund, a grant the school officials acknowledge receiving.
But there is a cryptic entry on the final page of the return that hints at insider dealings.
On July 19, 2002, the foundation made an investment “with two companies that are related to two trustees,” the return says. The investment was disposed of on Jan. 9, 2003, the entry continues, and the transaction met the requirements of IRS regulations.
What that transaction was, and who was involved, the return did not say.