Quorum Board Rejects Legal Action Against Community In Connection With Spin Off

Quorum Health's (QHC) board will not assert legal claims against Community Health Systems  (CYH) officials and Quorum's management team in connection with Quorum's spin-off from Community last year.

Brentwood, Tenn.-based Quorum operates and manages general acute care hospitals and outpatient services.

Quorum after the market close on Wednesday, April 5, said its board, through three independent directors, has wrapped up its investigation of matters that were brought up by R2 Investments LDC in an October letter. R2 is part of Texas hedge fund Q Investments LP.

Quorum shares were up 4 cents to $5.05 as noon approached on Thursday. Community shares were down 17 cents to $8.84.

Q Investments had alleged in a letter on Oct. 12 that Community management juiced up Quorum's numbers while concealing costs ahead of the spinoff in an effort to raise as much financing as possible, ultimately causing the latter's bond prices and stock price to tumble. The hedge fund had demanded Quorum's board undertake an independent investigation of the conduct of the management teams of Community and Quorum.

In a March 31 letter to R2, Quorum said that based on the investigation, which was conducted with the assistance of independent outside counsel Orrick Herrington & Sutcliffe LLP, and consideration of the applicable law, Quorum's independent directors had concluded that it would not be in the best interest of the company and its shareholders to asset legal claims against Community or its officers or directors.

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